Index confirms investors’ Brexit shock

The degree to which European institutional investors were caught off guard by the so-called Brexit has been laid bare by the latest State Street Investor Confidence Index.

The index, released this week, revealed that just days ahead of the United Kingdom's referendum, European investor confidence was reasonably positive.

It showed that while the global index declined marginally to 105.9, down 0.1 points from May's revised reading of 106, European confidence was in positive territory.

The North American index declined a further two points from June to 105.9, while the Asian index rose from 112.3 to 113.4 and the European index increased by 3.5 points to 100.3, ahead of the EU referendum.

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Discussing the phenomenon, State Street Global Markets senior managing director and head of global macro strategy, Michael Metcalfe said the rise in confidence evidenced by the index, helped explain why markets had moved so wildly following the vote to Leave.

"Investors' were not reducing risk sufficiently ahead of the vote," he said.

One of the founders of the index, Ken Froot said June was all about Brexit or Bremain as investors anxiously awaited the outcome of the EU referendum.

"This month's Investor Confidence Index reading did not capture the market's reaction to the seismic announcement that the UK will leave the European Union. It will be interesting to watch where professionals now perceive value in next month's index," he said.