As might be expected with persistent volatility and the eurozone crisis at the forefront of financial news, global investor confidence dropped slightly over the last month.

The December State Street Investor Confidence index, a global measure, fell to 99.3, down 0.1 point from November. Interestingly, confidence fell furthest among North American institutional investors, falling 2.0 points to 96.4, while levels rose slightly among European institutional investors, increasing 0.6 point to 102.2. Confidence in Asia fell 1.0 point to 93.7.

The monthly index measures investor confidence or risk appetite quantitatively by analyzing the actual buying and selling patterns of institutional investors.   The greater the percentage allocation to equities, the higher the risk appetite or confidence, said State Street Global Markets, the investment research and trading arm of State Street Corp., in a statement. A reading of 100 is neutral, the company said, as it is “the level at which investors are neither increasing nor decreasing their allocations to risky assets.”

Harvard University professor Kenneth Froot, co-developer of the index, described investors as “being in a holding pattern,” adding that “the meeting of European policy makers on December 9th did not address the over-arching questions in the minds of global investors” and that “they are likely looking forward to the first quarter of 2012 for greater clarity on the prospects for risk allocations in their portfolios.”

Paul O’Connell, the other co-developer of the index, noted that the results were a turnabout from the first half of the year, when European investors showed the most pessimism.  “It does not necessarily mean that prospects for the European region itself have improved, but it does suggest that European institutions are more willing to allocate to equities both inside and outside Europe than they were earlier in the year,” he said. 

Margarida Correia writes for Bank Investment Consultant.





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