Fund managers around the world are more optimistic about global economic growth over the next 12 months but at the same time are less tolerant of risk, a Merrill Lynch survey has found.

In February they moved their clients' money out of equities and into cash holdings and fixed-income investments.

"The survey shows signs that investors want to believe in an economic recovery," Banc of America Securities-Merrill Lynch co-head of international investment strategy Gary Baker said.

"However, caution on banks is firmly capping risk appetite."

The monthly survey was held between 6 and 12 March and drew responses from more than 200 fund managers, who together preside over US$533 billion.

For the first time in more than three years, investors do not expect lower global economic growth over the next 12 months.

Optimism about China's economy lies at the heart of the improved sentiment. Two months ago, 70 percent of respondents thought China's economy would worsen in the year ahead. That figure has fallen to just 1 per cent this month.

The percentage of fund managers who expected equities to return below average increased from 34 per cent in the February survey to 41 per cent in March.

Still, 42 per cent of fund managers believe equities are undervalued.

"How investors resolve this anomaly between growth optimism and risk reluctance will determine the fate of equity markets this spring," the company's other co-head of international investment strategy, Michael Hartnett, said.