North American investor confidence dropped the least in January, compared to other regions, but remains below the global average, according to State Street's Investor Confidence Index. The index logged a 0.1-point slip in North America last month, compared with a global dip of 2.1 points.

Globally, the ICI dropped to 92.4 in January, down 2.1 points from December’s revised level of 94.5. Meanwhile, North American investors exhibited the most risk aversion, with a confidence level of 89.8, noted State Street Global Markets, the investment research and trading arm of State Street.

“What is clear from the latest data is that institutional investors in both North America and Europe display increased caution as we embark on 2012, maintaining equity positions that can best be described as defensive,” said Professor Kenneth Froot.

“Seasonal effects arising from the end-of-year holiday period contributed to larger-than-normal revisions to last month’s numbers, muddying the picture of investor risk appetite a bit.”

European sentiment declined by 10.1 points to 91.6 from the revised December level of 101.7, as institutional investors “reallocated away from core equity positions,” the firm said.

Meanwhile, Asian investors supplemented their equity holdings, with sentiment increasing by 3.3 points from December’s revised reading of 93.6 to 96.9.

“It is clear from the significant decline in the European ICI that questions about the resolution of the European sovereign debt crisis remain uppermost in investors’ minds. A look at the underlying data reveals that investors did commit some new funds to emerging markets equities in January. It remains to be seen whether these flows will translate into wider commitments across more markets as we go through the quarter,” said Professor Paul O’Connell. 



“Notwithstanding this most recent rally in January, world equity prices remain about 10 per cent below their April 2011 short-term high,” Professor O'Connell added. 



The State Street Investor Confidence Index measures investor confidence by analyzing the buying and selling patterns of institutional investors. The index assigns a precise meaning to changes in investor risk appetite. As such, the greater the percentage allocation to equities, the higher risk appetite or confidence. 



A reading of 100 is neutral - the level at which investors are “neither increasing nor decreasing their allocations to risky assets,” the firm said.