Investors kicked off 2012 with slightly improved risk appetite thanks to better growth expectations especially in the United States and hopes for central bank action, a closely watched Bank of America Merrill Lynch survey for January showed on Tuesday.

The fund managers survey, which was conducted before Standard & Poor's downgraded nine eurozone countries' credit ratings on Friday, showed the region's sovereign debt problems remained the top concern for investors. Nearly one in two respondents expected a country would leave the euro bloc at some point.

The monthly survey, which polled 214 participants with combined assets of $655 billion, showed a net 12 percent of fund managers were overweight equities, up from 8 percent last month. The index reading shows the difference between overweight and underweight positions.

A net 27 percent of respondents were overweight cash, down from 35 percent last month. The underweight to bonds increased in January to a net 34 percent, compared with 27 percent last month.

"We start the new year with a picture of investors being less pessimistic on global growth. It's taken a long time for investors to get over global growth scare," said Gary Baker, European equity strategist at BofA Merrill.

"The United States has shown consistent improvement, exceeding growth expectations especially in the fourth quarter."

Expectations for global growth increased to the highest level since July, posting the biggest month-on-month increase since November 2009. Only a net 3 percent of respondents expect the economy to weaken over the next 12 months, compared with a net 27 percent.

The average cash balance fell to 4.4 percent, its lowest since July, from 4.9 last month, dipping below the 4.5 percent threshold that BofA says signals high cash levels.

Nearly 80 percent of fund managers expected the European Central Bank to conduct more direct and large-scale quantitative easing this year.

"There is a high conviction that there's a safety net to be utilized if necessary," Baker said.

The United States outpaced the Global Emerging Markets as the most favored region with a net 28 percent of respondents saying they are overweight the world's biggest economy, the highest reading since April 2010.

Hedge funds reduced their gearing levels further. The ratio of their gross assets relative to capital fell to 1.22 from 1.41 last month. Their net exposure to equity markets — measured as long minus short as a percentage of capital — remained unchanged at 31 percent.