Forward capital market assumptions reported by the largest investment consultants show overall improved expectations for most major asset classes and a minimal change in inflation. The data, aggregated by eVestment, show private assets leading the group, returning 8.7% and 8.8% on an annualized basis in the intermediate- and long-term*, respectively.
Average traditional equity and fixed-income assumptions were up 49 and 60 basis points, respectively, over the long term. Of the six consultant equity return assumptions observed, only Aon Hewitt Investment Consulting and Meketa Investment Group increased their long-term expectations for all seven major equity subclasses** considered. RVK raised its expectations for all but the U.S. equity subclasses. Much of the increase in fixed-income assumptions was related to the return of equity volatility and investors' related demand for safer assets.
Real asset return assumptions were the only asset class to decline in the intermediate term, falling 9 basis points from 2018's data. The average long-term return assumption of the asset class changed little between 2018 and 2019.
* Intermediate term < 10 years; long term > 10 years
**Emerging markets, global, international (ex-U.S.), U.S., U.S. large-cap, U.S. small-cap, U.S. smidcap.