Institutional investors recoil from risky assets

Global institutional investors have continued to retreat from risky assets, as the financial crisis has worsened and the potential for a global recession has grown, according to the State Street Investor Confidence Index, developed by State Street Associates LLC of Cambridge, Mass. Global investor confidence fell 17.5 points to 58.2, from a revised level of 75.7 in September. October’s index measures reallocations from Sept. 17 to Oct. 15. North American investors were especially nervous: Their confidence fell 24.3 points to 50.8. European confidence declined 1.5 points to 79.6, and Asian investors’ dropped 0.6 points to 86.5. Ken Froot, a professor at Cambridge-based Harvard University and a developer of the index, described this as an “unprecedented decline” led by North American investors. This month’s index suggests “a complete re-evaluation of risk across a wide investment community centered on U.S. institutional investors,” he said. The falling index reflects the largest reallocation of portfolios away from risk since data became available in 1994, according to State Street’s report. The index was released by State Street Global Markets, the investment research and trading arm of Boston-based State Street Corp.