By Laurence Fletcher

LONDON (Reuters) - British fund managers cut bond positions in June to their lowest level over the past year on concerns over the U.S. sub-prime mortgage sector and the prospect of low returns from the asset class.

A poll of 11 fund management firms showed average holdings of bonds, including both government and corporate debt, fell to 20.0 percent in June from 20.5 percent in May.

The poll also showed equity holdings remained at 72.3 percent, unchanged from May.

Cash positions rose to 5.4 percent, their highest level in three months, from 4.9 percent in May.

"We're as light in bonds as we can be, we just don't see the returns," said Andy Brunner, chief investment strategist at Forsyth Partners.

"I expect a gradual widening of credit spreads ... The subprime sector is likely to get worse before it gets better."

Credit spreads have widened in recent weeks on concerns over the U.S. subprime mortgage sector, which lends to borrowers with poor credit records at higher interest rates.

Several Wall Street banks have unwound positions in two Bear Stearns (BSC.N: Quote, Profile, Research) hedge funds that were heavily invested in the riskiest U.S. home loans.