By Claire Milhench
LONDON (Reuters) - Global investors trimmed their equities exposure in February, with many arguing that markets had become too complacent about risks stemming from Europe's election calendar after a recent blistering stock market rally.
A Reuters monthly asset allocation poll of 48 fund managers and chief investment officers in Europe, the United States, Britain and Japan showed overall equity exposure in global balanced portfolios had been cut a fraction, to 45.5 percent of portfolios from 45.8 percent in January.
The share of bonds rose to 40.3 percent from 39.9 percent in January, the poll showed.
While the majority of participants expressed concerns about upcoming elections in Europe, especially in France, there was also a view that the reflation trade - a bet on economic growth and inflation - had run ahead of itself.
Investors have piled into equities since Donald Trump's election as U.S. president, betting that his pledges to cut taxes and boost spending will spur growth.
"We think that the reflation trade is widely discounted and that markets have become complacent to downside risks," said Joost van Leenders, chief economist for multi-asset solutions at BNP Paribas Investment Partners.
The poll was conducted between Feb. 13-27, a time when global stocks hit record highs and the market cap of the U.S. S&P 500 (.SPX) index surged past the $20 trillion mark for the first time.
However, Trump has given few details on how his programs will be implemented, prompting investors to marginally trim U.S. exposure to 41.2 percent of equity portfolios.
"We simply don't know what Trump will do; his behavior is erratic and his recent executive orders have had poor implementation," said Peter van der Welle, a strategist at Robeco. "Tax reforms are announced but market patience is being tested in this respect."
Unease is also growing about French presidential elections due in April and May, with far-right candidate Marine Le Pen seen winning 26 percent of the vote in the first round.
Although she is expected to lose in the second round, the possibility of an upset cannot be discounted. Such an outcome could pave the way for a referendum on France's membership of the European Union (EU).
CAUTIOUS ON EUROPE
None of the poll participants who answered a special question on the subject said they were positioning for an EU break-up in the near-term, but several acknowledged this was a future possibility.
European investors have cut euro zone equity holdings to two-year lows, and some, such as Pioneer Investments, said they were hedging risks through options strategies or holding gold, which should outperform when volatility spikes.