Institutional investor sentiment remains resilient despite a bout of risk aversion driven by geopolitical tensions in the early days of August. The Global State Street Investor Confidence Index (ICI) rose to 122.8 in August, up 7.2 points from July’s revised reading of 115.6.

Improvement in sentiment was driven by an increase in the Asian ICI from 92.1 to 101.7 and a six point increase in the European ICI to 127.7. North American sentiment fell one point to 110.3.

“With benign developed market inflation, institutions may be positioning for continued accommodative policy from central banks,” said Jessica Donohue, senior managing director and head of research and advisory services, State Street Global Exchange.

Impending targeted longer-term financing operations, a lack of inflationary pressures across the Eurozone, and the potential for more easing from the European Central Bank may have provided tailwinds to European sentiment added managing director of State Street Associates Paul O’Connell.

“Moreover, resilient Chinese growth has reduced fears of a hard landing and helped boost Asian sentiment. With Chinese inflation running at low levels, the People’s Bank of China may also have further room to stimulate the economy,” he said.

The Investor Confidence Index measures investor confidence or risk appetite quantitatively by analysing 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.