New research shows sovereign wealth funds and institutional investors gradually deployed accumulated cash and reduced fixed income positions to add exposure to risk assets, while financial markets rebounded during the pandemic.

The analysis from State Street and the International Forum of Sovereign Wealth Funds (IFSWF), a global network of sovereign wealth funds from nearly 40 countries, used data from the former alongside qualitative interviews with seven of IFSWF’s largest members.

Risk sentiment across asset classes has also broadly improved during the period up to March 2021, particularly for foreign exchange, com...