The latest Merrill Lynch/Gallup study also reveals that fund managers were as surprised as anyone in the City when the Bank of England raised interest rates last week. Seventy per cent of UK fund managers surveyed before last week's decision said they believed the next move in rates would be down.
Trevor Greetham, a global strategist at Merrill Lynch, said the bank's decision "caught everyone on the hop". Mr Greetham said he disagreed with the view that the rate rise could jeopardise the economy's chance of achieving a "soft landing" - that is, achieving a sustainable growth rate without going through painful recession.
Mr Greetham said: "The Bank of England raised rates as a pre-emptive measure against inflation. You are more likely to see a soft landing now. Hard landings only tend to occur when you already have inflation in the system."
The survey showed that UK fund managers had become "aggressive buyers" of overseas bonds, with buyers outnumbering sellers by 28 per cent, the second-highest rate since the survey began in 1990. Gilts were also popular with the money managers, with buyers outnumbering sellers by 21 per cent.
Managers typically favour bonds over stocks when there are concerns about world economic slowdown, Mr Greetham said. "Recent turmoil in the emerging markets could be a sign of a slowing global economy. Bonds should outperform stocks for the next few months."
Although UK fund managers have little interest in domestic equities, they are still bullish about Continental equities, with buyers outnumbering sellers by 16 per cent. Mr Greetham said: "An upturn in European domestic demand and post-EMU restructuring should boost European corporate earnings."
Bonds are also proving popular with American fund managers, according to Merrill Lynch/Gallup. There are growing concerns in the US about the impact of the Asian crisis on corporate earnings.