After investing conservatively for the past four years, investors have rediscovered their risk appetite, according to a survey released Monday.

Investors are beginning to put their cash reserves to work in equity investments, according to the Bank of America Merrill Lynch survey of fund managers in January.

The survey indicates that for the first time since January 2006, investors are taking above average risk, relative to their benchmark. A net 2% of investors are taking "higher than normal" risk, compared with a net 7% taking "below normal risk" in December.

These figures follow several months of investors displaying optimism about the economy but maintaining a more cautious risk and investment profile.

"This survey is one of the more bullish we have seen and suggests that investors buy into the idea that this recovery has legs," said Gary Baker, the head of European equities strategy at BofA Merrill Lynch Global Research.

Average cash balances have declined to 3.4%, the lowest level since mid 2007 and down from 4% in December.

According to the survey, the appetite for equities is strong as a net 52% of asset allocators are overweight equities, up from a net 37% in December.

Fewer investors are protecting themselves against a fall in equities. A net 55% have no protection against a fall in the next three months, compared with a net 48% in December.

The survey, which was released Tuesday, polled 209 fund managers, which collectively manage $539 billion in assets, from Jan. 8 to Jan. 14.