Multi-managers redeployed built-up cash positions into investment grade bonds, alternative UCITS products and US equities in the last three months of 2016, according to quarterly research carried out by distributor Harrington Cooper.
During an eventful quarter, which saw a strong equity rally following the victory of Donald Trump in the US Presidential Election, average cash positions on balanced model portfolios were reduced by 2.3% to 5.7%.
Instead, allocators increased holdings in investment grade bonds, alternative UCITS and US equities by 1.03%, 0.97% and 0.66% respectively.
Harry Dickinson, managing partner at Harrington Cooper, said: "Professional investors increased equity allocations and put cash to work, as a market rally took hold in the wake of the US election.
"This was spurred by investors anticipating the potential impact of Donald Trump's pro-growth policies, which are likely to include corporate tax cuts, the repatriation of corporate cash held abroad and fiscal stimulus."
Harrington Cooper's proprietary research tool tracks the asset allocation of 32 multi-manager funds and model portfolios that follow a balanced risk profile, with AUM of around £11.1bn.
Across the balanced models tracked, multi-managers increased overall equity allocations by 0.9% to an average of 53.1%.
US equities saw the biggest increase of 0.7% to 8.6%, followed by European equities which enjoyed an average rise of 0.6%.
However, Asia ex-Japan equities were less popular with multi-managers, who cut exposure by 0.8% to 4.4%.
In fixed income, as rising inflation pushed up gilt yields, allocators reduced sovereign bond exposure on balanced models by 1.6% to around 4%, in favour of investment grade - where allocations increased by 1% to nearly 10%.
Looking at individual strategies, the £2.1bn BlackRock European Dynamic fund, managed by Alister Hibbert, was the most commonly held during the fourth quarter of 2016.
Meanwhile, the £2bn Hermes Asia ex Japan Equity fund, run by Jonathan Pines, and the £7bn Findlay Park American fund, were newcomers to the list of popular funds during the period.
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