There appears to be more evidence to suggest that a “great rotation” into equities is continuing.

“We are certainly seeing interest returning to the equity markets,” said Daniel Broby, chief investment officer at Silk Invest, a U.K.-based investment manager that provides institutional investors access to emerging markets.

Confidence in the global economy also appears to be on the rise as investors move to a more ‘risk-on’ approach.

“The macro environment seems to have eased up a little bit and there is better investor sentiment all round,” said Gerard Mizrahi, managing partner and chief executive of Charles Street Securities Europe, a U.K.-based private equity and venture capital firm.

A recent survey by investment bank BofA Merrill Lynch found that a net 59% of investors believed that the global economy would strengthen in the year ahead, which marked four consecutive months of rising sentiment.

Over 250 managers with $691 billion of assets under management participated in the survey in the first week of February and a net 13% of global investors still said that equities were still undervalued despite the strong market performance of early 2013.

At the same time, a net 82% said bonds were overvalued, the second-highest level recorded by the survey with the highest coming at the peak of the European sovereign bond crisis in 2012.

But despite this optimism over equities, the survey found that the risk appetite of fund managers towards equity allocations was easing with pharmaceuticals, traditionally a defensive sector, returning to prominence, while the biggest month-on-month faller was technology, which is traditionally viewed as a cyclical sector.

“The continued high level of optimism is a concern and markets may be vulnerable to bad news, but valuation support suggests any correction should be short and shallow, and our core ‘great rotation’ theme remains in play,” said Michael Hartnett, chief investment strategist at BofA Merrill Lynch Global Research.

John Bilton, European investment strategist at BofA Merrill Lynch, added: “Investors are striking a balance between the optimism over growth and caution over investment decisions. Investors have so far resisted taking an exuberant stance.”

Hedge funds, too, have performed well in the month of January as the rising equities landscape lifted most strategies.

BarclayHedge, a hedge fund data vendor, said that hedge funds gained 2.84% in January, according to its Barclay Hedge Fund Index.

“Fiscal cliff fears receded, European banks strengthened, China avoided a hard landing, Japan stimulated its economy and global equities rallied,” said Sol Waksman, founder and president of BarclayHedge.

“Economic sentiment continues to improve and investors have moved to ‘risk on’ mode as fears of a euro collapse diminish.”