Institutional Investor Confidence on the Upswing

With North American and European institutions leading the way, institutional investor confidence has risen in November, according to research by State Street Global Markets.

(December 1, 2010) — State Street Global Markets, the investment research and trading arm of State Street Corporation, has found that its investor confidence index rose to 97.5 from 88.2 in November.

Harvard University professor Kenneth Froot, who helped develop the index, stated: “Confidence in North America remains below the neutral level of 100, but overall the numbers are indicative of an improved attitude to risk as valuations have declined from the early November highs.” The increase, according to State Street, was driven by North American and European investors. Meanwhile, Asian investors were less bullish, with confidence declining by 8 points to 95.2.

“Looking at the underlying data, we continue to see an appetite for emerging markets and growth economies, at the expense of the developed world,” commented Paul O’Connell of State Street Associates. “The confidence reading for Europe is indicative. Sovereign debt concerns have roiled domestic markets within the region and institutional investors domiciled in Europe have shown a renewed interest in deploying risk globally, despite the uncertainties at home.”

The State Street Investor Confidence Index measures investor confidence by analyzing the actual buying and selling patterns of institutional investors. Developed by Froot and O’Connell of State Street Associates, the index assigns a meaning to fluctuations in investor behavior. According to the firm, the greater the percentage allocation to equities, the higher is risk appetite or confidence.

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