The global economic recovery continued to build but the increase risk of sovereign default has led to AXA Global Investors reducing its exposure to global bonds in the past three months.
AXA Global Investors chief economist Bevan Graham said emerging markets remained the favoured asset class.
"The recovery is proving to be hard work, but structural change was never going to be easy.
"The early signs are that the necessary rebalancing we need to see for a sustained recovery in global growth is starting to occur."
There was still a long way to go, he said.
Should the next set of risks be successfully managed, recent developments could be looked back on as the dawning of a new age of global prosperity.
The next task was the management of the unwinding of the extraordinary monetary, fiscal and liquidity measures that were put in place during the darkest days of the economic crisis.
The timing and sequencing of those moves would be critical, Mr Graham said.
"In our view, the hardest task ahead in many countries will be getting fiscal policy back on to a sustainable path.
"Governments have got a difficult balancing act ahead as they try to support economic growth, maintain entitlements, cope with sharply lower revenue and try to keep public debt in check," he said.
Investment strategy head Keith Poore said sovereign risk moved to the fore in the past three months as concerns over Greece's fiscal accounts shook investors into taking a harder look at the finances of other countries.
Elevated budget deficits presented upside risk to bond yields, particularly in the United States and the United Kingdom.
"We think it's time to add a little more sovereign risk insurance to the portfolios."
AXA had recently reduced its global bond allocation, placing the funds in domestic cash.
It had also reduced its offshore currency hedge.
Because the New Zealand dollar usually fell during global risk events, increasing the offshore currency exposure added further down side protection.
"With the global economy recovering and corporate profits rising, decreasing the equity allocation is too costly insurance at this stage.
"We remain overweight in equities, with emerging markets still our preferred asset class," Mr Poore said.
