GLOBAL - Commodities have largely fallen out of favour with investors across the globe, a recent survey by Towers Watson has shown.

With responses from more than 140 investment managers overseeing $13.5trn (€10.1trn) in assets, close to four-fifths of those surveyed in the 2011 Global Survey of Investment and Economic Expectations were also bearish about nominal government bonds, with close to three-quarters instead favouring investment in emerging market debts.

Additionally, emerging market equities and public equities were strongly favoured, with 85% stating they would seek exposure to the emerging markets, while 79% - a five-percentage point increase over last year's survey - would invest in public equities.

Commodities have fallen out of favour over the last 12 months, with only 35% feeling positive about exposure to the market, down by 50%.

Carl Hess, global head of investment at the consultancy, said Western markets were expected to continue lagging behind, with the euro-zone in particular fighting an uphill struggle.

However, he was more optimistic about managers' risk appetite.

"There is sustained optimism from last year reflected in, among other things, an increase in the expected propensity of investors to take risk in 2011 and managers' commensurate bullishness about risky assets," he said.

While he noted central banks across the globe would aid economic recovery in many countries, Hess said expected interest rate hikes were cause for some concern.

"While markets anticipate a gradual increase in policy rates, uncertainty around the timing and the extent of rate hikes will be a dominant source of uncertainty and market volatility," he said.

Hess further called on central banks to fight against increasing inflation, while conceding that this would be made easier by normalising market conditions.