The Reuters monthly survey of UK-based funds was conducted between Sept. 15-28, a period when the Bank of Japan announced a shift towards targeting long-term bond yields, vowing not to let 10-year yields dip below zero.

That move, after the European Central Bank's Sept. 8 decision to hold off further stimulus, raised speculation that despite very little sign of economic revival, policymakers are becoming wary of extending policies such as negative interest rates and bond-buying.

"Volatility tends to increase as we head into autumn. Near-term risk factors include the U.S. presidential election, the possibility of a weak patch in economic data and political tensions in Europe," said Trevor Greetham, head of multi-asset at Royal London Asset Management (RLAM).

U.S. voters will elect a new president on Nov. 8, and markets are weighing the odds of a win for Donald Trump, with his controversial views on trade, immigration and tax.

Adding to this toxic mix is the uncertain fate of Deutsche Bank, whose shares have sunk to record lows after the giant German lender was hit with a U.S. fine of up to $14 billion.

The poll data showed UK funds had cut equities by more than 2 percentage points from August to 43.9 percent of their global portfolios, the second lowest level since 2010. Within their equity portfolios, the euro zone's share fell 2 percentage points to 16 percent.

Bond holdings meanwhile rose to 30.3 percent of global portfolios, up from last month's 28.6 percent, poll data showed.

Within their fixed income portfolios, investors increased their euro zone bond holdings to 30.7 percent, the highest level since February, as worries about the banking sector offered an incentive to switch out of equities.

But the broad September retreat in world shares was not matched by emerging markets, which posted their fourth straight month of gains <.MSCIEF>, up 14 percent year-to-date.

Greetham said RLAM had added to its emerging equity positions by trimming its U.S. holdings and holding an underweight in Europe.

Also, the Fed should move slowly with policy tightening, Will Thompson, an investment analyst at HSBC Global Asset Management, said.

"We see the most opportunity in the emerging markets complex, including both local debt and equity," Thompson added.

In response to a question on whether bond yields in developed markets would rise, half of those who responded replied in the affirmative. The issue has become prominent amid warnings that a multi-decade bond bull run is about to end, and a sudden mid-month spike in long-dated yields.

Rob Pemberton, investment director at HFM Columbus, was among those expecting yields to rise.

"There is an increasing perception that (zero interest rates) are becoming counterproductive and that fiscal policy will need to shoulder the burden alongside central banks who are now nearly tapped out," Pemberton said.

Europe poll story (EUR/ASSET)

U.S. poll story (US/ASSET)

UK poll story (GB/ASSET)

Japan poll story (JP/ASSET)

China poll story (CN/ASSET)

(Editing by Catherine Evans)

By Sujata Rao