Russell Investments quarterly survey of investment managers, completed late in June, found nearly 70% of managers were bullish about equities - and none were bearish. The rest were "neutral".

Russell Investments senior manager investment consulting Alister Van der Maas, says this is interesting given that equity markets have already significantly rebounded since the troughs of March this year.

"The overall sentiment seems to be that the New Zealand market remains undervalued," Van der Maas says.

In sharp contrast the nine key investment managers who took part in the survey were bearish about cash and bonds, specifically government bonds.

Van der Maas says 75% of managers were bearish on bonds, compared with 44% last quarter.

"This is no surprise given the large weighting of the New Zealand bond market to government bonds, a sector of the bond market viewed with pessimism given the significant bond issuance by governments globally," he says.  "Russell's US survey, for example, found 83% of managers bearish to US Treasuries, while at the same time 66% were bullish to high yield bonds and corporate bonds."

Managers forecast another quarter of negative growth before the pain starts to ease. They also thought the New Zealand dollar was likely to depreciate over the next 12 months and it would fall out of favour with international investors.

Managers were also asked this quarter what they thought would be the long-term inflationary effects of the fiscal and monetary policies implemented by global governments in response to the financial crisis. The general consensus was there would be moderate inflation over the short term mainly due to a shift in consumer behavior, current low rates of capital utilisation and a reduction in the ability of banks to lend. But the managers thought there would be higher inflation over the longer term.