US recession seen by 70 pct of money mgrs-poll

NEW YORK, March 31 (Reuters) - The near-term outlook of money managers around the world has turned decidedly grim, with seven in 10 expecting a U.S. recession this year, a survey showed on Monday.

However, more than a third of the institutional fund managers in Asia, Europe and North America who took part in the poll conducted in February are actively seeking opportunities in illiquid securities, suggesting some investors see a bottom in the market.

Most investors are still reeling from the credit crisis, which has touched just about every financial market in the world. About a third of the 234 fixed-income and equity investors in the survey conducted by research consultancy Greenwich Associates said they they have suffered losses due to mortgage-backed securities.

"Growing fears of systemic risk and doubts about the soundness of some counterparties show that investors are increasingly worried about the ability of some markets to function properly on a much broader level," Greenwich Associates consultant Frank Feenstra said in a note.

Skyrocketing defaults in the subprime U.S. mortgage market sparked a rush out of risky assets in the summer of 2007, then turned into a crisis, freezing lending among banks.

Many investors holding securities linked to the crisis have had them blow up in their faces. Losses on mortgage-backed securities were most common in Europe, where 40 percent of investors were directly hit, compared with 38 percent in the United States.

Indeed, 40 percent of fund managers in Europe said their assets under management have declined due to the credit morass.

As a result, many investors have been scrambling to pare down the risk in their portfolios. Sixy-percent of fund managers are changing or have changed their strategies because of the credit crisis.

Seventy-percent of investors believe that tighter credit will increasingly starve companies of much-needed capital and ultimately drag down economies around the world.

"If companies begin to have trouble obtaining credit, a crisis that until now has been mainly a concern of financial institutions will begin to have a real and dramatic effect on the global economy," said Greenwich Associates consultant Tim Sangston. (Reporting by Kevin Plumberg; Editing by Jonathan Oatis)