Guess Who Was Buying Amid the June Sell-Off

BOSTON – June 25, 2013 — State Street Global Markets, the investment research and trading arm of State Street 

Corporation (NYSE:STT), today released the results of the State Street Investor Confidence Index® (ICI) for June 

2013. 

The Global ICI rose to 106.8 in June, up 11.9 points from May’s revised reading of 94.9. The increase was largely 

driven by an increase in risk appetite among North American investors, as evidenced by the 11.4 point increase in 

the North American ICI to 114.0 from May’s revised level of 102.6. Confidence also increased among European and

Asian institutions, with the European ICI up 4.7 points to 98.4 from a revised 93.7 in May and the Asian ICI index 

ticking up to 89.1 from May’s reading of 86.0. 

The State Street Investor Confidence Index was developed by Harvard University professor Kenneth Froot and Paul 

O’Connell of State Street Associates. It measures investor confidence or risk appetite quantitatively 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 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. 

“The robust increase in the top-line Global ICI number shows that institutional investors took somewhat contrarian

positions during the month,” commented Froot. “We witnessed selling of US equities, buying of European equities, 

and significant buying of Emerging Markets equities. These reallocations run counter to price movements over the 

period, though it should be noted that our data sample ends on June 21st and hence does not cover the most recent 

downturn in equity prices. Overall, our data suggest that institutional investors are content to ‘take the other side’ of 

these price moves.”

“With this month’s increases, both the Global ICI and the North American ICI are in ‘accumulate risk’ territory, above 

the neutral level of 100, and the European ICI is close to that level,” added O’Connell. “While the prospect of an end 

to quantitative easing in the US has caused a spike in bond yields and a sell-off in equities, institutional investors 

have viewed this as an opportunity to add equity risk at the expense of bond holdings. We will be watching the data 

closely to see if this is a one-off opportunistic trade, or a more durable valuation-based strategic trade.”