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 below. 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 1900 1 1 Close Based on historical real yields for U.S. large-cap equities and 10-year Treasuries; methodology and sources described in Appendix of the paper. ).
The information contained herein is only as current as of the date indicated, and may be superseded by subsequent market events or for other reasons. The views and opinions expressed herein are those of the author and do not necessarily reflect the views of AQR Capital Management, LLC, its affiliates or its employees. This information is not intended to, and does not relate specifically to any investment strategy or product that AQR offers. It is being provided merely to provide a framework to assist in the implementation of an investor’s own analysis and an investor’s own view on the topic discussed herein. Past performance is not a guarantee of future results.