Global investors pumped up their holdings of equities and real estate in June and cut back on bonds, reflecting their more enthusiastic outlook for the world's economy, a closely watched survey showed on Tuesday.
But investors also fretted that equities may be overvalued and that euro zone periphery debt and U.S. high-yield bonds were crowded trades.
The monthly survey by Bank of America Merrill Lynch, which polled 167 fund managers with combined assets of $422 billion, showed asset allocation to equities rose to a net 48 percent overweight position in June from a net 37 percent last month.
The net reading shows the difference between overweight and underweight positions.
Demand for real estate rose to a net 6 percent overweight, its highest overweight position in eight years.
Extra stimulus from the European Central Bank, which cut euro zone deposit rates to negative levels this month, helped stoke the appetite for riskier assets.
"Overall, the tone is very, very, very optimistic, especially in the euro zone," said Obe Ejikeme, European equity and quant strategist at BofA.
Euro zone equity holdings rose to a net 43 percent overweight, the second highest overweight position since July 2007, before the global financial crisis.
At the same time, however, a net 15 percent of investors think global equities are overvalued, the measure's strongest response since 2000.
Overall allocation to relatively safe bonds fell to a net 62 percent underweight from a net 55 percent last month, with a net 75 percent of investors regarding them as overvalued.
Cash levels dropped to 4.5 percent from 5 percent, as investors grew more confident about putting their money to work.
Some 39 percent of investors think long euro zone peripheral debt is the most crowded trade, and 28 percent think U.S. high-yield is too packed.
Yield-hungry investors have been pouring cash into Europe's peripheral debt, sending yields of Italy, Spain and Ireland - countries prominent in the euro zone debt crisis - to record lows.
U.S. high-yield debt, meanwhile, is yielding less than emerging market debt, even though the average credit rating of the asset class is lower.
Reflecting increased risk appetite, investors moved to an overweight position in global emerging equities for the first time since Nov 2013, at 5 percent net overweight from 11 percent underweight in May.
The possibility of debt defaults in China has become the most significant risk for investors, followed by "asset mania", a new category in the survey.
"There is a general underbelly of feeling that the