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Investors warming back up to banks

– Investors are the most optimistic on banks since the top of the bull market in 2007, bolstered by record-low interest rates and an improving outlook for global growth and profits, a Bank of America survey showed.

“Fund managers have maintained their level of optimism in terms of risk appetite,” said John Bilton, European investment strategist at Bank of America’s Merrill Lynch unit.

The MSCI World Index, a global equities benchmark, has climbed 5.2 percent since the start of 2013, touching a 4 1/2 -year high Feb. 1. Financial firms are the second-best performing industry group behind health-care companies, rallying 6.6 percent so far this year. They surged 26 percent in 2012.

Almost half of respondents said they were prepared to sell government bonds to fund the purchase of riskier equities, while allocations in alternative investments and real estate climbed to the highest level in almost five years.

“Investors are beginning to warm up to a gradual recovery,” Bilton said. “They are going to increasingly recognize that corporate bonds, like government bonds, have essentially run out of yield.”

Expectations for global growth and profits surged to the highest levels in 24 months, according to the survey. Even so, investors increased their holdings in so-called defensive pharmaceutical and consumer-staples companies. They reduced their allocation in energy and materials and cut their holdings in technology companies to the lowest level since 2009.

Emerging markets remained the most favored region among the global survey’s 194 respondents, followed by euro-area and U.S. equities.