As institutional investors periodically review their asset allocations, they typically begin with capital market assumptions (CMAs) for each asset class and strategy in their portfolios. eVestment’s 2020 Capital Market Assumptions Report reviews CMAs from 11 different consultants spanning two years and takes a closer look at their outlooks across various asset classes entering 2020.
By looking at each asset class or investment strategy’s return expectations, institutional investors can construct a portfolio with an overall risk/return composition that fits their needs. By aggregating the 2019 and 20201 capital market assumptions, this report equips consultants, asset managers and institutional investors to conduct their own comparisons of this data.
The CMAs in this report were intended for use prior to the coronavirus outbreak. Post-outbreak, some consultants have updated their outlooks for various investment strategies. eVestment plans to follow and report on the impact of the global pandemic on consultants’ capital market assumptions, but this analysis of pre-crisis assumptions remains useful to understand how consultants were thinking as various markets operated near all-time highs and rates near all-time lows.
We also included a section illustrating how consultants are communicating their views and advice for dealing with the impact of the pandemic on investor portfolios. The following findings are based on analysis of 2019 capital market assumptions and pre-pandemic 2020 return expectations.
- On average, all asset classes across all consultants saw declines in their return expectations.
- Within intermediate-term Equity assumptions, Callan left all their 2020 Equity assumptions unchanged.
- For long-term Equity assumptions, RVK was the only consultant who increased their Emerging Markets Equity assumption (7.14% to 7.26%, 12 bps). However, RVK decreased all other equity assumptions.
- The average intermediate-term Emerging Markets Debt (Hard Currency) assumption fell by 147 bps, while the average intermediate-term Emerging Markets Debt (Local Currency) fell by 136 bps.
- Aon and Meketa increased their long-term assumptions for Infrastructure and Infrastructure (Core) by 50 bps and 20 bps respectively, while NEPC decreased their assumption for Infrastructure/Land by 30 bps.
- For long-term assumptions, RVK was the only consultant to increase their Private Equity return expectation.