More investors are taking on more risk in the first few weeks of 2012, Bank of America Merrill Lynch said after wrapping up a survey of fund managers.

The report is compiled from a survey of 214 institutional investors and is good news for a market that needs spending and investing to generate economic activity. The report strikes a more optimistic tone from December when the same survey predicted anemic global growth in 2012 due to risks of a European recession, higher oil prices and slowing growth in China.

Only 3% of respondents believe the world economy will weaken over the coming year, down from 27% in December. That’s the largest one-month improvement in the investor outlook since May 2009, BofAML analysts said.

While investors in mortgage-backed securities are pushing trustees to review the quality of home loans backing the bonds, investors in other sectors are growing more confident and cautious at the same time, the investment bank said.

The firm’s composite risk and liquidity indicator shows cash levels have fallen to their lowest point since July, and the proportion of investors taking lower than normal levels of risk has improved to 33%, down from 42% in December when investors were more reluctant.

“Investors are tip-toeing rather than hurtling toward higher risk exposure,” said Michael Hartnett, chief global equity strategist at BofA Merrill Lynch Global Research. “The U.S. market and high-quality cyclical sectors, such as energy and tech, have been the main beneficiaries of lower cash holdings.”

Only 21% of those surveyed expect corporate profits to deteriorate this year, down from 41% in December, and more investors said corporations should be investing revenues with about 55% of those surveyed claiming corporations are under investing.

About 56% believe the outlook for U.S. companies is more favorable than any other region, up from 50% in December.

About 70% are worried about the eurozone, claiming it’s the least favorable region in terms of investment.

Write to Kerri Panchuk.