Investor index takes record fall

In a hardly surprising but dramatic reflection of recent market events, the State Street Investor Confidence Index for October has fallen by a full 17.5 points to a record low of 58.2, mostly driven by North American fund managers.

The index, which represents an analysis of the actual buying and selling patterns of institutional investors, saw North American investor sentiment fall particularly sharply from 75.1 points in September to just 50.8 points this month.

It said elsewhere the falls were less dramatic, with European confidence falling by just 1.5 points to 79.6 and Asian confidence declining by 0.6 points from 87.1.

Commenting on the index, Harvard University professor and co-author of the index Ken Froot said the month had generated a dramatic and unprecedented decline in investor confidence to a new record low, led by investors in North America.

“We saw broad and important reductions of risk across investor portfolios previously at times like the Asian Crisis in 1997 and the Russian-LTCM crisis in 1998,” he said. “However, even the strong broad-based selling of risk we saw during those events appears small compared to current outflows.”

Froot said the combination of financial crisis along with a truly global macroeconomic risk of deep recession had caused a complete re-evaluation of risk across a wide investment community centred on US institutional investors.

State Street Associates director Paul O’Connell said when it is remembered that the index was not a survey but based on the actual trades of institutional investors, the readings were particularly striking.