European investors failed to sufficiently reduce risk from their portfolios ahead of the UK referendum, according to State Street.
The data from this month’s Investor Confidence Index (ICI), compiled by State Street, showed a significant increase in confidence among European investors up to the index’s cut-off date of 22 June, two days before the referendum result was announced.
While global and North American confidence fell by 0.1 points and 2.0 points respectively, both now at 105.9 points, the European ICI climbed to 100.3, 3.5 points higher than last month.
This indicates the European market weren’t adequately reducing their risk in the lead up to the referendum according to State Street Global Advisors’ senior managing director and head of global macro strategy, Michael Metcalfe.
"This helps to explain why markets have moved so wildly following the vote to Leave," said Mr Metcalfe.
ICI developer Kenneth Froot commented that while this month’s index didn’t capture the UK’s "seismic announcement", next month’s index should provide a clearer picture of the reaction.
"It will be interesting to watch where professionals now perceive value in the next month," he said.