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Currency tops the list of asset classes fund managers are most likely to move into over the next 12 months, ahead of equities and commodities, according to a survey of 102 managers by RBC Capital markets.

Thirty-eight per cent of fund managers said they were likely to increase their allocations to foreign exchange, while 37 per cent named equities and 35 per cent commodities. Currency was most popular even though this was the asset class where managers felt risks had risen most over the past 12 months.

Adam Cole, global head of FX strategy at RBC said asset managers were attracted by the high liquidity and hedging potential of currency markets.

“We are also seeing asset managers becoming increasingly sensitive to their indirect currency exposure and to correlations between FX and other asset markets which require more active management,” said Mr Cole.

The survey showed two-thirds of the asset managers surveyed expect an improvement in the US stock market over the next year while almost 70 per cent believe Asian equities will enjoy gains.

But opinion was split on prospects for European equity markets with 38 per cent expecting gains while 40 per cent predicted a decline. More than half of the respondents said the risks associated with equities generally were higher now than last year.