DEFINITION of Institutional Investor Index

The Institutional Investor Index was a measure of sovereign debt risk that was published biannually in the March and September issues of Institutional Investor magazine. It was also commonly known as the Country Credit Survey. The Institutional Investor Index was an indicator used to identify and measure economic conditions of booms and crises.

BREAKING DOWN Institutional Investor Index

The Institutional Investor Index was a country risk assessment model available to investors. Country risk refers to a collection of risks related to investing in a foreign country, including political risk, exchange rate risk, economic risk, sovereign risk and transfer risk. Country risk is an important consideration for individuals and institutions interested in foreign investments.  

When Institutional Investor published its first country credit ranking in the late 1970s, risk assessment was in its early stages. Agencies such as the World Bank and the International Monetary Fund as well as borrowing governments did not readily disclose information. Investors and bankers had minimal data upon which to make decisions; rather, they relied upon ideology and assumptions about global credit quality.

Through the advancement of technology, bankers and investors have received more accurate information as countries have become more transparent in sharing data. However, many finance analysts point out that financial crises are always different and often come about unexpectedly. Therefore a report such as the Institutional Investor Index was meant to be taken cautiously.

The Institutional Investor Index was constructed by requesting survey responses from between 75 and 100 investment bank research departments (such as loan officers with major multinational banks) who provided evaluations of a particular country or countries. The answers were then weighted in accordance with the particular bank's global exposure and the level of sophistication for that country's analysis systems. The scores of the Index ranged from 0 (zero), which implied certain default, to 100, which implied no probability for default.

The last Institutional Investor Index, or Country Credit Survey, was published March 2016. Now Institutional Investor focuses on surveys for analysts (both buy side and sell side) and portfolio managers to name the world’s best investor relations programs and executives.