By Chris Vellacott

LONDON (Reuters) - British fund managers have lifted exposure to equities at the expense of bonds as they seek to boost performance on the back of an expected continuation of the stock rally into the new year.

British managers built their equity positions to 61.9 percent in October from 57.2 percent the previous month.

The shift in direction comes after two months of declines in equity allocations and indicates investors are increasingly confident the market recovery will keep its momentum as fears of a double-dip recession recede.

Earlier this month a Bank of America Merrill Lynch survey of fund managers found fears of a double-dip recession diminishing while investors considered inflation and monetary tightening not to be immediate concerns, heralding a surge in risk appetite during October.

"Markets will continue to perform into the new year," said Jeremy Beckwith, chief investment officer at Kleinwort Benson.

Eleven fund managers participated in the Oct 20-26 poll, including two who were not among the 10 who took part in September's poll. So the figures for the two surveys are not completely comparable.

British manager cut their bond holdings to 22.1 percent in October from 26.5 percent in September, while cash rose to 5.4 percent from 4.5 percent.

Britain's blue chip FTSE 100 .FTSE index is currently trading around 50 percent above the lows reached in March.