"The continued high level of optimism is a concern and markets may be vulnerable to bad news, but valuation support suggests any correction should be short and shallow, and our core 'Great Rotation' theme remains in play," said Michael Hartnett, chief investment strategist at BofA Merrill Lynch Global Research.

"Investors are striking a balance between the optimism over growth and caution over investment decisions. Investors have so far resisted taking an exuberant stance," said John Bilton, European investment strategist.

Allocations towards equities have held at the highs reached in January. A net 51 percent of asset allocators remain overweight global equities. Within equities, sectoral allocations highlight a bias toward a measured easing of risk appetite with a shift toward defensive assets.

Pharmaceuticals, a traditional defensive sector, have returned to the number one sectoral pick for global investors, having been third in the pecking order a month ago. The proportion of investors overweight the sector rose to 27 percent from 11 percent in January.

Cyclical sectors become less popular. The biggest month-on-month faller was Technology, which saw a negative 12 percentage-point swing in the number of investors overweight the sector. Materials also suffered a double-digit fall in the percentage of overweights. The number of respondents overweight Technology, Industrials and Energy also fell.

Japanese equities continue to benefit from a positive shift in sentiment by global investors. A net 7 percent of asset allocators say they are overweight Japanese equities this month, up from a net 3 percent in February. In December, a net 20 percent were underweight Japanese equities.

Local sentiment and risk appetite appears strong. A net 29 percent of Japanese investors responding to the Regional Fund Manager Survey say they are underweight cash, up from a net 5 percent one month ago. Automotives, Technology and Banks are the three most popular sectors domestically.

Global investors have indicated that their positive view toward Japan will continue. A net 21 percent of the panel says that the outlook for corporate profits in Japan is more favorable than for anywhere else, up from a net 4 percent in January. Accordingly, a net 9 percent says that Japan is the region they would most like to overweight. Two months ago, a net 17 percent said Japan was the region they most wanted to underweight.

This positive outlook comes at a time when investors see the yen as weakening, despite the fact that the currency is close to fair value based on the IMF's definition of currency valuation. Four out of ten respondents to the global survey said that USDJPY rising to 100 is likely to happen before a U.S. debt downgrade, a Spanish bailout or gold breaking through $2,000 per ounce.

BofA Merrill Lynch surveyed a panel of 251 fund managers with $691 billion of assets under management from Feb. 1-7, 2013, and a total of 194 managers, who manage $555 billion. BofA also interviewed 130 managers, with $270 billion under management, for its regional surveys.