Alternative Thinking

2019 Capital Market Assumptions for Major Asset Classes


Topics - Asset Allocation Portfolio Construction Strategic Asset Allocation

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2019 Capital Market Assumptions for Major Asset Classes

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. ).


Clustered column chart of Expected real returns for liquid asset classes Q1
Source: AQR; see Exhibits 3-6 for details. “Non-U.S. Developed Equities” is cap-weighted average of Euro-5, Japan, U.K., Australia, Canada. “Non-U.S. 10Y Govt. Bonds” is GDP-weighted average of Germany, Japan, U.K., Australia, Canada. Estimates are for illustrative purposes only, are not a guarantee of performance, and are subject to change. Not representative of any portfolio that AQR currently manages.

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The information contained herein is only as current as of the date indicated, and may be superseded by subsequent market events or for other reasons.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.


Hypothetical performance results have many inherent limitations, some of which, but not all, are described herein. The hypothetical performance shown was derived from the retroactive application of a model developed with the benefit of hindsight.  Hypothetical performance results are presented for illustrative purposes only.


Diversification does not eliminate the risk of experiencing investment loss.


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This material is intended for informational purposes only and should not be construed as legal or tax advice, nor is it intended to replace the advice of a qualified attorney or tax advisor.


AQR Capital Management is a global investment management firm, which may or may not apply similar investment techniques or methods of analysis as described herein. The views expressed here are those of the authors and not necessarily those of AQR.