U.S. fund managers decreased their heavy exposure to stocks in November while increasing their cash allocations ahead of 2009's close and on signs that economic recovery may be slow, a Reuters poll showed on Monday.

Based on 11 U.S.-based fund management firms, surveyed November 12-27, firms raised cash holdings for a second consecutive month, to an average of 2.7 percent of their assets, compared with 1.9 percent in October and 1.6 percent in September.

November's figures include one more fund, but on a like-for-like basis, the overall group's direction is the same.

The increase in cash positions could accelerate as investors begin to unwind higher risk trades in the wake of the Dubai debt crisis, which began as final polling was taking place.

Fears of a possible debt default at a state-linked Dubai conglomerate could serve as the catalyst for an overdue correction in equities and risk assets, including corporate and high-yield junk bonds, Mohamed El-Erian, chief executive of bond firm Pacific Investment Management Co., told Reuters.

Already, money managers have been taking down exposures in such markets because they had surged so fast.

We're scaling back in stocks, said Keith Wirtz, chief investment officer at Fifth Third Asset Management, a Cincinnati, Ohio-based firm that oversees $20 billion.

When you see an asset class rise 60 percent from its bottom, you have to reassess. There isn't a lot of conviction that we will see another year of huge returns, Wirtz added.

The Standard & Poor's 500 index <.SPX> has rallied over 61 percent since its March low, while rising more than 5 percent in November alone.

Yet economic conditions still look vulnerable: U.S. third-quarter GDP was revised lower to a 2.8 percent growth rate, from the first reported 3.5 percent rate; and real consumption growth was revised down to 2.9 percent from 3.4 percent.

The 11 U.S.-based fund management firms held an average of 62.6 percent of their assets in equities in November, down from 64.5 percent the previous month but higher than the 60.6 percent at the start of the year.

Stripping out the new fund in November, the remaining firms which responded this month and last held an average of 63.9 percent of their assets in equities in November, down from 64.1 percent. For bonds, the group of 10 managers held an average of 32.4 percent of their assets in bonds, up from 30.2 percent in October. In cash, these managers held an average of 2.6 percent in November, up from 2.1 percent the previous month.

While many have acknowledged in the last few weeks the growing wedge between market valuations and economic and corporate realities, few have been willing to take their equity exposure down in the absence of a correction catalyst, El-Erian said. The Dubai announcement is serving as this catalyst.

(Polling by Bangalore Polling Unit; Editing by Kenneth Barry/Ruth Pitchford)