That marked a reversal from the month before, when enthusiasm was tempered by concern about the impact of a U.S. government shutdown and a weak start to European third-quarter earnings season.

The monthly poll of 13 British-based investment managers showed average equity allocations at 55.5 percent, up from 54.1 percent in October. Bond holdings held at an average 24.4 percent.

That was the most optimistic view of equities since August. It came as the percentage of funds held in cash dropped to 6.5 percent, its lowest since May, the survey found.

Uncertainty over when the U.S. Federal Reserve will start to pare back its bond-buying programme and whether Washington would strike a longer-lasting deal on U.S. debt remained a concern, the funds said. That will keep markets volatile.

"The pace and scale of removing the massive global monetary stimulus remains one of the key risks for markets and various investment strategies over the coming months," said Berry Chief Investment Officer Mark Robinson.

"However, there are some encouraging signs that economic conditions are improving in general, consumer confidence too, and this will hopefully protect markets from any major setback next year."

The Fed has said it would reduce its bond purchases when economic data improve enough to warrant it. Consumer confidence has picked up, but other releases have been patchy.

That picture is mirrored elsewhere. UK growth is a relative European bright spot against a still-weak euro zone, where the European Central Bank cut rates to a record low this month and left the door open to do more.

For Thomas Becket, chief investment officer at Psigma Investment Management, the "mostly political" risks meant the firm was "as diversified as we have ever been. We expect the remainder of the year to follow the same path as the first nine months -- volatility, nervousness but ultimately with positive performance."

That trend has left equities among the best-performing asset classes in 2013. The MSCI Developed Equities is up a quarter and the U.S. Standard & Poor's 500 <.SPX> has been posting record highs. http://link.reuters.com/kug88t

Gains in the latter have been particularly marked since the Fed first floated the idea of 'tapering' earlier this year. That led many investors to switch out of U.S. stocks and into Europe.

The survey found allocations to U.S. and Canadian stocks, at 28.1 percent, was the lowest for more than two years. Those for the euro zone slipped to 14.3 percent, the lowest since August.

Matthew Farrell, investment specialist at London & Capital, said improving global growth and the potential for more market flux when the Fed finally acts had driven a series of portfolio tweaks.

"We have increased our allocation to equities, reduced our exposure to interest rate-sensitive fixed income and increased our allocation to cyclical fixed income sub-sectors such as financials and high yield," he said.

(Reporting by Simon Jessop; editing by Ron Askew and Larry King)

By Simon Jessop