Horizon Spring 2014 – 10-year average annual expected returns
Calculating expected returns for asset classes forms one of the cornerstones of asset allocation. Having a lengthy investment time-horizon makes it feasible to allow for an eventual innovation shock leading to a paradigm shift in economic regime. We have based our models on a 10-year investment time-frame. For each asset class, we have put forward two projections for annual average returns, the difference being whether we have made allowance for an innovation shock or not.