Horizon: update of our expected returns from asset classes over the next 10 years

We have updated our estimates of expected returns in the new edition of Horizon.

  • Expected returns for almost all asset classes are lower than in a historical comparison—in many cases substantially so.
  • A traditional 60/40 portfolio (60% equities, 40% government bonds) would return just 6.9% annually with an innovation shock and 4.2% without, on our calculations (assuming a split between the S&P500 and US Treasuries), compared with 10.9% in 1981-2012.
  • Generating higher returns will mean accepting higher risk—there is no longer any ‘free lunch’.

For further details, please read the enclosed version of “Horizon – 10-year average annual expected returns”, Autumn 2015.