The study, which asked IFAs their thoughts on current market trends, found that 41 per cent of respondents are looking to increase their clients’ asset allocation to the sector by the end of the year.
This optimism was further supported by the proportion of advisers intending to up their risk exposure in general; almost three-quarters – 72 per cent – of respondents stated that they had already re-risked their clients’ portfolios, or would expect do so within the next six months.
In terms of the wider macro outlook, more than half of advisers said recent rounds of quantitative easing were having a limited effect, and a further 25 per cent claimed they had seen no positive effects of the policy, and felt it was likely to lead to an inflation problem in the long-term.
Peter Beckett (pictured), head of international marketing at Schroders, says that the popularity of European equities has increased among investors in the third quarter of this year as valuations are currently attractive.
"Despite on-going uncertainty across Europe, this survey has highlighted a possible turning-point in investor sentiment towards European equities and risk assets," he commented. "This year's results also indicate that while client demand for income prevails, the appetite for risk has increased in the past six months."
He added: "Elsewhere, investors are showing caution towards the US, considering uncertainty surrounding the health of the economy and the as-yet unresolved fiscal issues."
Beckett believes that investors' outlook towards equity is becoming more bullish and he says it will be the dominant asset class for the last few months of 2012.
"With valuations looking particularly attractive at the moment, this could indicate that the time for a re-entry to risk assets may be upon us," he said.
In a recent FE Trustnet article, Hargreaves Lansdown’s Rob Morgan said he was a fan of Europe, but did not expect investors to significantly up their exposure to the region.
However, these results from Schroders suggest otherwise and are supported further by a recent study into investor behaviour from Skandia, which also indicated there had been an uptick in demand for Europe.
The third-quarter inflows figures from the fund platform found that sales into European equities rose 27 per cent over the three-month period. Although overall sales in this area are still low, they have now overtaken emerging markets – which fell by 3 per cent over the period.
“European equities stand out as a potential opportunity as they are so undervalued, and the outlook for Europe is improving all the time," commented Graham Bentley, head of proposition at Skandia.
Bentley also supports Beckett’s belief that equities are now without question the most attractive asset class.
"The real growth going forward is likely to come from equities rather than fixed interest stocks," he said.
Performance of indices over 1-yr
Source: FE Analytics
"Equities generally continue to be undervalued, but real gains can be made from choosing the right sector for investment. It might surprise some people but the FTSE 100 is up more than 20 per cent in the last year, and the FTSE 250 by 30 per cent."