Insights
Institutional Investor Indicators: March 2025
The State Street Risk Appetite Index fell to -0.09 in March, as investors continue their retracement from risk assets towards a more cautious and defensive multi-asset stance.
April 2025
Our monthly video series offers an updated analysis of our institutional investor indicators.
- Our Institutional Investor Holdings Indicator shows the aggregate holdings of institutional investors across three asset classes: stocks, bonds and cash. This simple information can tell us a lot about how investors view the economy and markets.
- Our Institutional Investor Risk Appetite Indicator is based on flows — buying and selling activity — rather than portfolio positions. It reveals whether investors, in aggregate, are buying risk or selling it. While the Holdings Indicator tells us about the current location, the Risk Appetite Indicator tells us about the direction of travel.
The State Street Risk Appetite Index fell to -0.09 in March, as investors continue their retracement from risk assets towards a more cautious and defensive multi-asset stance. The State Street Holdings indicators show that long-term investor allocations to equities have continued their reverse from the post-global financial crisis highs earlier in the year. During March, outflows from equities of 0.75 percent were offset by inflows into bonds and cash of 0.4 percent and 0.35 percent, respectively.
View March 2025 commentary by Dwyfor Evans, head of APAC Macro Strategy for Markets.
The month of March saw progressive deterioration in risk appetite among institutional investors. A centerpiece of the narrative was policy uncertainty around trade and protectionism, with a dual-pronged potential impact around (slower) growth and (higher) inflation. Most notably around investor caution was a continued unwind in USD overweight positioning, which bucks the usual safe haven trend associated around risk aversion. Investor caution prompted a further retracement out of equities and into bonds and cash in approximately equal increments. This is a trend that signals the usual equities to bonds rotation witnessed during a monetary easing cycle and which infers expectations around growth slowdown are stronger than upside inflation surprises at this juncture.
USD selling accelerated and by March month-end, USD positioning was on the cusp of the first underweight for three years. Underlying asset flows to the US were a picture of consistent selling throughout the month. Canada was at the fore of trade related headlines, which weighed on investor sentiment in the CAD as protectionist threats weighed. Cross-border equity flows to Canada have also been weak in line with a deteriorating picture for growth. The unexpected announcement of fiscal spending in Germany prompted higher regional yields – notably in Bunds – and this prompted a shift back into the EUR with consistent top quartile flows, notable given an entrenched underweight. The extreme Bunds overweight prompted aggressive investor selling on fiscal expansion plans. Fears around trade protectionism run deep in emerging Asia, although explicit fears of tariffs on China was offset to some degree by renewed optimism around the Tech and IT sector. Stronger equity inflows to China have part-rotated from elsewhere in the region, most notably India.
