Lookback

A global investor confidence index that estimates the risk appetite of institutional investors by analysing the proportion of their allocations to equities has risen to its highest level this year. The State Street Investor Confidence Index (ICI) rose by seven points to 93.5 between May and June. The index is still below the ‘neutral' figure of 100, however, which would represent a scenario where institutional investors are neither increasing nor decreasing their allocations to equities.

The biggest hike in confidence was among North American institutional investors, where risk appetite rose by 5.7 on the index. Europeans, however, are still found to be the most confident, with their regional index at 102.5. According to State Street Global Markets, this may be due to capital flows from European ‘safe havens' to US, UK and Asian equities.

 

Passive investment is a "very risky approach", according to Valentijn van Nieuwenhuijzen head of strategy at ING Investment Management. During a visit to London from The Hague, Van Nieuwenhuijzen said that in the current environment a passive investment strategy means tying in to low, uncertain and volatile returns.

The strategist, who spoke at ING conference Risk, Returns and Rebellion: The Age of Uncertainty on June 27, said the economic uncertainties have resulted in investors being far more risk averse. "You really need to manage the risks in a much more integrated way and what you need to continuously think about is the total risk and the total return that is associated with that portfolio," he said. "At the same time, if you look at the valuations and risk premia that you see in financial markets today, it is pretty clear that this environment creates a lot of opportunities to invest in markets, but you have to do it in a more adaptive and more dynamic way, because there's less stability and less predictability."

 

"Investment in middle Africa requires patience but the rewards can be very high," was a message from Paul-Harry Aithnard, group head of research at Ecobank speaking at the launch of the bank's Middle Africa Guidebook 2012: Fixed Income, Currency and Commodities, in June.

The guide details the economic outlook of 22 African countries. It argues that factors such as a bull run on commodities since 2001, relatively low deficits (on average around 40% of GDP) successful fiscal measures and cutting-edge mobile phone technology have contributed to the region becoming increasingly attractive to investors, providing a viable alternative to Europe. "With the exception Nigeria, Kenya and to some extent Ghana, most of these markets are significantly underserved," said Arnold Ekpe, chief executive of Ecobank. "Our aim is... ultimately to develop and deepen Africa's commercial markets with more sophisticated debt, equity and derivative instruments."

Between January 2010 and June 2012, the Ecobank Middle Africa Bond Index consistently outperformed JP Morgan's benchmark Emerging Market Bond Index, posting an average return of 12.5% per annum, with a risk of 6.5%, compared to JP EMBI's 10.4% return with 6.7% risk.

 

A survey conducted in the wake of the Libor (London Interbank Offered Rate) fixing scandal found that the reputation of the UK's biggest banks has been left in tatters, with 60% of people saying they no longer trust them to look after their money.

The YouGov poll, published on July 2, also revealed that half of customers (49%) think high-street banks are dishonest and 45% of responders believe they are incompetent. In addition, only one in a 100 people asked believe that the behaviour of senior executives at big banks has improved since the financial crisis began.

In the three days after details of the rate-fixing scandal were brought to light, Move Your Money UK reported a 15-fold increase in hits to the campaign website. Building societies and The Co-operative also reported a significant increase in enquiries.

The YouGov poll was conducted on June 28 and June 29, with 1,760 people surveyed.

 

A report from the University of East Anglia has warned wine investors not to put all their eggs in one basket. Despite the fact that the fine wine investment market is dominated by French wines, diversification across Italian, Australian and Portuguese wines could prove a "shrewd move" for investors, according to the research. This is because prices can fluctuate according to weather, reputation, interest rates and the wider economic situation, among other factors. Because of this "diversification across other wine-producing countries is likely to be much more efficient in reducing overall investment portfolio risk," states the report.