Market Insights

Institutional Investor and Sovereign Wealth Fund Activity During the Pandemic

Reasons for Optimism?

March 2021

Financial markets proved remarkably resilient to the 2020 global pandemic and worst recession observed in a century.

Last year, we teamed up with the International Forum of Sovereign Wealth Funds (IFSWF) to analyze investor behavior during the economic crisis precipitated by the COVID-19 pandemic. Our May 2020 study, Pandemic, No Panic: Evidence from Institutional Investor Flows, showed signs of caution, selective risk-taking, and rebalancing in asset allocation and investor behavior.

To better understand key capital flow and re-allocation decisions from May 2020 to March 2021, we analyzed State Street’s dataset of unique indicators for capital flows, portfolio positions and the behavior of long-term institutional investors. To complement the data, IFSWF surveyed a sample of seven of its largest members that deploy capital in the global markets.

Despite caution at the start of 2020, our research found that investors began to add exposure to risk assets as the financial markets rebounded. We explore investor activity throughout the pandemic, from institutions with lower risk appetites to those increasing their risk exposure. Taken together, our research points to reasons for optimism in 2021.