Capital Market Assumptions for Major Asset Classes

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This article updates our estimates of medium-term (5- to 10-year) expected returns for major asset classes. It also includes a section on estimating expected returns for private equity and real estate. Selected estimates are summarized in Exhibit 1. The year 2018 saw cheapening across many asset classes, and compared to last year expected returns are somewhat higher for equities, U.S. Treasuries and credit. However, from a historical perspective, nearly all long-only investments still have low expected real returns. The expected real return of the traditional U.S. 60/40 portfolio is 2.9%, compared to a long-term average of 5% (since 19001 ).