A new report “from the coalface” of super fund investing has gone some way to quantifying the cost of shonky investment management, with members potentially losing out on hundreds of thousands of dollars.
Surging equity markets have driven the Future Fund’s return higher, but its prediction that inflation will be stickier than expected has been born out and it “remains conscious of the potential for significant deterioration”.
Asia leads the way up as world investor confidence wanes
(Pictured: Kenneth Froot)
Forget uncertainty about China, Asia as a whole is propping up global investor confidence, according to the latest State Street Global Exchange investor confidence index. Europe is down significantly and the US is down a bit. But Asia is up.
Kenneth Froot, the Harvard professor who works with State Street’s research arm, State Street Associates, said last week that the search for riskier assets which had been observed among big investors for much of 2014, appeared to diminish in December.
He said: “While the collapse in oil prices should provide a substantial boost in real incomes in 2015, presently it has added to fears about the global growth outlook, prompting a modest pause in investors’ risk-seeking run.”
The global investor confidence index slipped last month to its lowest point of the year – down from 113.7 to 112.1. Europe fell 10.2 points to 1119.5 while the US slipped 1.5 points to 102.6. Asia rose 1.7 points to 100.0.
The index, developed by Froot and State Street colleague Paul O’Connell, measures investor confidence or risk appetite quantitatively by analysing the 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 risk appetite or confidence. 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.
Michael Metcalfe, the head of global macro strategy at State Street Global Markets, said: “With no additional monetary stimulus from the ECB in December, hopes have been transferred to the upcoming January meeting. However, with Eurozone deflation soon becoming a reality and Greeks’ default risk rising once more, Eurozone confidence appears vulnerable to any disappointment.”
