The headwind from pension funds keeps blowing hard, even in a rising market (see Pension Funds Flee Stocks in Search of Less-Risky Bets). Pension funds equity exposure is a good long term contrarian indicator. Their equity exposure troughed in 1990 and peaked in 2006-07, a perfect buy-high sell-low pattern, not unlike Joe Public mind you.
(…) the State Street Investor Confidence Index measures investor confidence on a quantitative basis by analyzing the actual buying and selling patterns of institutional investors. The index assigns a precise meaning to changes in investor risk appetite: the greater the percentage allocation to equities, the higher is risk appetite or confidence. A reading of 100 is neutral; it is the level at which investors are neither increasing nor decreasing their 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.
Globally, Investor Confidence fell 1.9 points from September’s revised reading of 88.1 to 86.2. In North America, confidence fell by 3.2 points to 84.9 from September’s level of 88.1. Investor confidence in Europe remained largely static, ticking down 0.6 points to 96.4 from 97.0 in the prior month. Across the regions, confidence among Asian investors remained positive at 103.3, though this level was down 4.4 points from the September reading.
“This month saw institutional investor confidence continue to ease further,” commented Froot. “Looking at the underlying data, institutions have been allocating away from developed markets and towards emerging markets, but the net of the two flows has been negative. This continues a pattern established at the beginning of August and would suggest that institutional investors are content to play the role of liquidity provider rather than liquidity taker in the current market environment.”
“Similar to last month, we see continued reticence on the part of investors to invest in the major economies,” added O’Connell. “The euro region did receive some flows during the month, but flows to the US, UK, Japan and Australia were generally anemic. The most attractive destinations for institutional flows over the month were China and India, reflecting that growth appears more compelling to investors in these regions than in the core developed markets.”