Global institutional investors were upbeat this month, led by a surprisingly big boost in Europe. That’s according to a leading indicator of how institutional investors feel about market conditions, State Street’s Global Investor Confidence Index.
The August 2022 index was 107.3 points, up from 102.2 in July 2022 and 94.2 in June 2022. It was the highest score since the beginning of the year.
A score above 100 indicates positive institutional investor sentiment and below 100 signals a negative view.
European investor confidence was up sharply, by 20.3 points to a score of 106. That was, similarly, the highest value recorded in 2022.
“Despite the many potential headwinds, including rising inflation concerns and energy security facing the European economy, interestingly, European investors have moved from a risk averse posture to a more neutral posture over the past month as markets rallied through much of August,” Rajeev Bhargava, head of investor behaviour research at State Street Associates, on 31 August.
Bhargava continued: “Even after the selloff over the past week, net flows by European investors have been from developed to emerging market stocks, which has driven up the confidence score. However, it is going to be important to monitor whether the enthusiasm persists given recent heightened volatility in equity markets on the back of increasingly hawkish Fed speak.”
The index for North America was also positive, going from 104.5 to 106.5, while the figure for Asia-Pacific was down, from 93.2 in July to 92.4 in August.
According to State Street: “A reading of 100 is neutral; it is the level at which investors are neither increasing nor decreasing their long-term allocations to risky assets. The index differs from survey-based measures in that it is based on the actual trades, as opposed to opinions, of institutional investors.”
State Street has a large business as a bank for institutional investors, with $38.2trn in assets under custody or administration. Its own fund business has €3.5trn in assets under management, as of 30 June 2022. The firm employs 40,000 staff globally, including roughly 1,000 in Luxembourg.