Northern Trust said it sees emerging markets equities returning 9% annually in the coming five-year period, saying emerging markets are "no longer a homogeneous high-growth cohort, but they are expected to provide a valuation-driven return premium for the risks involved."
Developed markets are seen returning 7.4% annually.
The firm said private equity is expected to provide an illiquidity premium over public equities – a composite of 75% leveraged buyouts and 25% venture capital is expected to return 9.2% annually in the next five years.
Global fixed-income returns are expected to be just north of 2.5%, and high-yield bonds are forecast to return 5.8%.
Chief Investment Strategist Jim McDonald said hedge funds can continue to offer attractive risk-adjusted returns, but require careful manager selection.