Morgan Stanley Investment Management Introduces Institutional CIO Confidence Index

New York —

Morgan Stanley Investment Management (MSIM) released the findings today of its inaugural Institutional CIO Confidence Index, a broad measure of institutional investor sentiment that tracks the degree of confidence among chief investment officers that their investment portfolios will meet performance targets over the next 12 months.

Developed by MSIM in partnership with Greenwich Associates, the Institutional CIO Confidence Index is based on the results of interviews conducted over a six-week period ending November 1, 2009 with 50 institutional CIOs from public pension funds, corporate pensions, and endowments and foundations.  The participants represent an aggregate of $548.8 billion in assets under management, with an average of $11 billion per plan. 

In addition to the confidence gauge, MSIM sought to capture other measures of expectations among institutional CIOs-including 12-month return forecasts for individual asset classes, macro-economic indicators, as well as asset allocation adjustments and the rationale behind any changes. 

The key findings of the first installment of the Index survey, which is intended to provide a statistically meaningful measure of forward-looking institutional sentiment, included:

  • Index Results - Ranging from a scale of -100 (not confident) to +100 (totally confident), the Institutional CIO Confidence Index measured aggregate CIO confidence in the surveyed period at a modest 7.6, indicating that institutional CIOs remain uncertain about the prospects for their portfolios in the coming year.  Responses, however, varied considerably among institutional investors, with the Index scoring a moderately bullish 20 among corporates, a more restrained 10.6 among publics and a decidedly more bearish -9.4 among endowments and foundations.

  • Index Drivers - Fixed income is expected to be the main driver of positive investment performance in the coming 12 months, with high-yield and investment-grade corporate fixed income perceived as likely top performers in absolute terms.  These are the only two asset classes that the CIOs expect, in aggregate, to beat the internal return targets set by their institutions.  Although the CIOs named U.S. equities as their number-three top performer for the next 12 months, average returns on the asset class are expected to fall short of long-term targets.

  • Asset Allocation - The results reveal the extent to which institutional portfolios have been affected by both the dramatic drop in asset valuations associated with the global financial crisis and the subsequent recovery in global markets.  More than 30 percent of the CIOs plan to reduce allocations to U.S. equities in the next 12 months, and an equal share plan to reduce allocations to non-U.S. equities.  Less change is expected in fixed income allocations, with almost two-thirds of the CIOs indicating that their institutions plan to keep fixed-income allocations stable at current levels.  Roughly 80 percent of the CIOs plan to keep cash allocations steady over the coming year.

  • CIO Outlook - The neutral sentiment indicated in the Institutional CIO Confidence Index was also reflected in CIOs' projections for a variety of macro-economic indicators.  While predictions of U.S. GDP growth of 2.8 percent for the next 12 months can be seen as a bullish expectation at this point in the economic cycle, the CIOs participating in the Index expressed concerns about a host of risks that could jeopardize the recovery in the global economy and financial markets in 2010.

The complete findings of the Institutional CIO Confidence Index are available upon request.

Morgan Stanley Investment Management, together with its investment advisory affiliates, has nearly 1000 investment professionals around the world and approximately $386 billion in assets under management or supervision as of September 30, 2009.  By leveraging its global  ‘community of boutiques' structure and the strength of Morgan Stanley, MSIM strives to provide outstanding long-term investment performance, service and  a comprehensive suite of investment management solutions to a diverse client base, which includes governments, institutions, corporations and individuals worldwide. 

Morgan Stanley (NYSE: MS) is a leading global financial services firm providing a wide range of investment banking, securities, investment management and wealth management services.  The Firm's employees serve clients worldwide including corporations, governments, institutions and individuals from more than 1,200 offices in 36 countries.  For further information about Morgan Stanley, please visit www.morganstanley.com.

Survey participants are not employees of MSIM. Moreover, the forecasts or opinions expressed do not necessarily represent those of the Firm.  Information in the report does not pertain to any MSIM product and should not be considered as an offer, or a solicitation of an offer, to buy or sell any security or instrument or to participate in any strategy.  In addition, the information does not contend to address the financial objectives, situation or specific needs of any individual investor.  The report has been prepared solely for informational purposes.  All investments involve risks, including the possible loss of principal.

Media Relations Contact: Erica Platt, 212.762.6848