“As central banks force short-term rates higher, 10- year government bonds are poised to make historically low returns.”

This abridged edition of Horizon sets out our rationale behind our expected returns forecasts relative to risk for the next ten years across some 35 asset classes.

This exercise forms the basis of our strategic asset allocation policy – our core decisions on asset class weightings over the long term. It also helps enormously with client expectations and transparent communications.

We choose a 10-year time period because our client profile typically exhibits a long term investment horizon – often with a view towards the next generation – but also because we judge 10 years to be an appropriate period, encompassing as it does typical and full economic and market cycles.

10-year average annual expected returns (%, in local currency)

The main message from our work is that we have entered a low returns environment and consequently are modifying our approach to asset allocation. This edited version of Horizon is designed for those who have perhaps more interest in the conclusions of our analysis in terms of hard numbers – and the justification of those conclusions – rather than the complex methodology that lies beneath.

We hope it sets out in accessible form the journey we make from our initial, top-down macroeconomic analysis to arrive first at our expected returns and, finally, to the implications this has for our clients in terms of portfolio composition.

Read full Horizon Executive Summary