This is a change from the previous quarter’s IMO, where uncertainty around risk prevailed, according to the latest Investment Manager Outlook (IMO) quarterly survey from Russell Investments.

This quarter, managers’ bullishness for U.S. large-cap growth equities was at 69% (up from 58% bullishness in the December IMO), and on the emerging markets front, there was a 10 percentage point increase in bullishness from last quarter to 66% in the current survey. Across style and cap levels, the latest IMO survey demonstrated managers’ increased bullishness for equities.

“Managers are seeing opportunities to take on moderate risk for what could be attractive return opportunities. In fact, in the latest IMO survey we are seeing that they are more willing to invest in areas where, even six months ago, they were showing nervousness,” said Rachel Carroll, consulting client executive at Russell Investments. “Seeing professional money managers making these dynamic shifts in a relatively short-term window underscores the importance for investors of having multi-asset portfolios that offer the flexibility to take advantage of these potential opportunities.”

Reduced risk aversion and a search for better returns may also be driving the drop in bullish sentiment for corporate bonds and other fixed-income asset classes in the latest iteration of the IMO. Manager bullishness for corporate bonds was 32% and U.S. Treasuries was 4%, reflecting a drop of nine and five percentage points, respectively, from last quarter.

Europe continues to influence portfolio decisions  

As a result of ongoing challenges in Europe, nearly half (46%) of the managers surveyed expect to have less-than-typical exposure over the next 12 months to companies that derive a significant portion of their revenue from Europe. Another 21% plan to have less-than-typical exposure to companies that are highly sensitive to the global economy as a whole.

Managers indicated that European challenges would lead them to reduce exposure to the consumer staples (25%), consumer discretionary (24%) and utilities (24%) sectors, and to increase allocations to the technology (41%) and energy (31%) sectors.

In the latest survey, nearly a quarter (22%) of managers say they plan to increase their exposure to Europe during the next 12 months due to the buying opportunities presented by the market’s broad selloff during 2011.

Opportunities arise in technology   

Technology maintained its position as the most-favored sector for the 13th consecutive quarter, with 81% of managers expressing bullishness for technology in the latest survey, up from 73% in December. According to Russell, manager enthusiasm for the technology sector as it relates to Europe is largely an active management play.

“Technology companies tend to be big exporters and therefore one might expect less enthusiasm for the sector in light of a European recession−but this is where active management can have an edge,” Carroll said. “The best managers are actively seeking out opportunities in specific companies within the sector where they are able to identify strong potential growth prospects.”

Real estate sees jump in bullishness  

Real estate saw a 12 percentage point jump in bullishness this quarter to 45%. While this figure is low in comparison to managers’ responses for other asset classes, it represents an all-time survey high for real estate.

 “Optimism around real estate is likely a reflection of the improving fundamentals in that market, particularly in areas such as core commercial real estate,” Carroll said. “REITs have rebounded from their lows during the financial crisis and are within reach of their all-time highs−this is certainly a positive development, as the real estate asset class can deliver useful diversification.”