Global institutional investor confidence has climbed steadily throughout February as risk appetite continues its rebound, according to data from State Street Global Markets (SSgM).
The State Street Global Investor Confidence Index (ICI), which measures investors’ risk appetite based on their percentage allocation to equities, continues its recovery after slumping to its lowest recorded levels in late 2012.
The global ICI rose 8.7 points this month to 94.8, up from January’s revised reading of 86.1. Renewed confidence from North American institutions, which jumped 13.9 from 85.1 in January to reach 99 in February, was cited as being behind the increase.
European institutional investors also felt more optimistic, pushing the index for that region up from a revised 89.4 in January to 92.2 in February. In contrast, risk appetite among Asian institutional investors declined by 4.5 points from January’s revised reading of 91, settling at 85.5.
“In February, we saw continued demand on the part of institutional investors for equity securities,” index co-developer Kenneth Froot of Harvard University said.
“Since reaching a record low in November 2012, the appetite for risk has rebounded considerably. There are a number of risks on the horizon that may give investors pause, including US fiscal negotiations, the outcome of the Italian elections and the direction of Fed policy, so caution is warranted,” he said.
Mr Froot also explained that strong and persistent ‘de-risking’ by institutions, which has characterised recent years, has been suspended.
“The pronounced increase in North American investor confidence is noteworthy, as it represents a 19-month high for that regional Index,” State Street Associates director Paul O’Connell said.
“The composition of flows that we have observed is also consistent with an increased appetite for risk, with institutions adding to equity positions in Japan, Europe (excluding the UK) and the emerging markets.
“Confidence among Asian investors remains tepid, and this may well reflect question marks around whether growth in the region will be internally or externally driven, going forward,” Mr O’Connell said.
