Global investors are more optimistic about the economy during the next year. The Bank of America Merrill Lynch Survey of Fund Managers reports that only 3 percent of fund managers surveyed in January believe the global economy will experience a slowdown in 2012, compared to 27 percent in December.

The global survey of 214 institutional investors also showed that individuals are turning back to more risky ventures now that things are improving.  The BofA Merrill Lynch Composite Risk and Liquidity Indicator is the highest it has been since July 2011, before the sovereign debt crisis fully emerged. Cash levels have fallen to their lowest levels since last July and cash now makes up about 4.4 percent of a portfolio, compared to 4.9 percent in December.

The proportion of investors taking lower than normal risks has improved to a net 33 percent of the panel, compared to a net 42 percent in December.

“Investors are tip-toeing rather than hurtling toward higher risk exposure; the U.S. market and high quality cyclical sectors, such as energy and tech, have been the main beneficiaries of lower cash holdings,” said Michael Hartnett, chief Global Equity strategist at BofA Merrill Lynch Global Research.

“Despite improvement in global and European growth expectations, asset allocators remain deeply skeptical towards European equities, especially banks,” said Gary Baker, head of European Equities strategy at BofA Merrill Lynch Global Research.

Fears of a global corporate profit slowdown still exist, but are much lower than at the end of 2011, the report found. Twenty-one percent of the panel still expects worldwide profits to decline in 2012, compared to 41 percent who held that view in December.

The U.S. is still the preferred investment location, although some of the negative views toward Europe have eased. Fifty-six percent of those surveyed believe the outlook for corporate profits in the U.S. is more favorable, up from 50 percent in December. A net 70 percent said the profit outlook for Europe is the least favorable of all regions, compared to 72 percent a month ago.

Technology is back on top as the most desired investment sector, edging out pharmaceuticals. U.S. fund managers are returning to banks, while Europeans continue to reject them.

An overall total of 286 panelists with $818 billion of assets under management participated in the survey from Jan. 6-12. A total of 214 managers, managing $655 billion, participated in the global survey. A total of 144 managers, managing $336 billion, participated in the regional surveys. The survey was conducted by BofA Merrill Lynch Research with the help of market research company TNS.

The BofA Merrill Lynch Global Research franchise covers more than 3,300 stocks and 1,000 credits globally and ranks in the top tier in many external surveys.

Bank of America is one of the world’s largest financial institutions, serving individual consumers, small- and middle-market businesses and large corporations with a full range of banking, investing, asset management and other financial and risk management products and services.