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Long-term return forecasts 2018

  • Posted by: ,  Chief Executive
  • 05 February 2018
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"Expected" returns across the world's major asset classes

In the midst of market volatility, it can be helpful to stand back and take a more detached, long-term view. Long-term return forecasts are key inputs into many asset allocation models. Here we've listed some of the top papers, published in the last few months, which provide long-term return expectations for the main asset classes.

At the end of the list, we've included a few papers that examine longer-term themes, such as secular trends, demographic drivers and disruptive technology.

Savvy Investor
Capital Market Line: The Capability Cycle Keeps on Giving (PineBridge Investments, Jan 2018)
PineBridge's latest Capital Market Line shows forecasts for returns and standard deviations over the period 2018-2022. The authors note that, by some valuation measures the recovery may be extended, but a variety of economic indicators suggest that we are still mid-cycle, with events unfolding to favor continuing growth.

SSGA Long-Term Asset Class Forecasts, Nov 2017
SSGA combines their assessment of economic growth, inflation, current valuations, and risk premia in order to generate their long-term total return estimates. Short-term forecasts from tactical asset allocation models are also included.

Long-term return forecasts 2018 - diminished expectations (Deutsche AM, 2018)
(For compliance reasons, this paper is only accessible in the UK)
This paper describes Deutsche Asset Management's return assumptions over a long-term time horizon, covering equities, fixed income, and alternatives.

2018 Long-Term Capital Market Expectations (Franklin Templeton Investments)
(For compliance reasons, this paper is only accessible in the EMEA region)
In their 2018 Long-Term Capital Market Expectations paper, Franklin Templeton uses forward estimates of economic data (not just historical performance) to generate return expectations over a time frame of the next 5 to 10 years.

Five-Year Expected Returns 2018-2022: Coming of Age (Robeco, Sept 2017)
Robeco forecasts their 5-year expected returns for all asset classes, focusing on broad trends such as secular stagnation, volatility, passification, the Eurozone, and the origin of returns.

Five-Year Outlook 2018-2023 (BMO Global Asset Management, Dec 2017)
BMO's Five-Year Outlook considers scenarios and opportunities relevant to investment managers, including themes such as demographics and labor supply, populism, innovative technology, and the global economic outlook.

Long-run asset class performance: 30yr return forecasts (2017-46) Schroders
Schroders presents their 30-year return forecasts for a host of asset classes. Their methodology is based on a series of building blocks and estimates of risk premia. Also included within are country-specific return expectations for Asia.

2018 Long-Term Capital Market Assumptions (JP Morgan AM, Oct 2017)
This year’s edition of JP Morgan's Long-Term Capital Market Assumptions report explores secular themes like technology, demographics, and some cyclical factors that should influence returns over the next 10 to 15 years.

Capital Market Assumptions (BlackRock, Nov 2017)
In this quarterly update, Blackrock describes its Capital Market Assumptions as of November 2017, having updated their five-year capital market assumptions after recent gains in asset values.

SSGA Long Term Smart Beta Forecasts, Sept 2017
In order to generate their long term smart beta forecasts, SSGA derives excess return expectations from current factor valuations and return premiums on a historical basis, then combines this info with equity total return forecasts.

The Rationale for Investing in Secular Trends (Robeco, 2017)
A good story on its own does not translate into a solid investment strategy. Herein, Robeco establishes a trend investing philosophy by laying out a conceptual and analytical framework for trend investing that moves beyond story telling.

Institutional Investment: Short-term thinking on the rise? (Franklin Templeton)
(For compliance reasons, this paper is only accessible in the EMEA region)
Franklin Templeton discusses results of a comprehensive survey on how institutional investors are adapting to market conditions such as technological disruption, demographics, political instability, regulatory change, and lower yields.

Long-Term Thinking: Demographic drivers (LGIM, June 2017)
(For compliance reasons, this paper is not accessible in the USA or Canada)
Demographic factors are shifting towards disadvantageous territory, with the global labour force declining, fewer births, and increased retirement age populations. LGIM derives long-term views from these global demographic trends.

Back to long-term investing in the age of geopolitical risk (Amundi, Dec 2017)
Amundi presents their analysis of a survey of pension plans on the topic of how to cope with a variety of geopolitical and economic risk factors, while still managing assets with a long-term mindset.

Longer Term Investments: Automation and Robotics (UBS, 2017)
UBS discusses recent trends and the outlook for factory and process automation, industrial software and 3D printing, as well as commercial drone and AI.

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