Ninety One’s Capital Market Assumptions framework focuses on the key drivers of long-term performance. We do this to better understand possible future returns, enriching discussions with our clients.
Our framework emphasises income payments across asset classes, as they are both readily measured and pivotal in determining returns. In addition, long-term history is available, and income is less subject to manipulation than accounting metrics.
We divide returns into three components. The first – income – is a tangible, known entity, but the others are subject to material misestimation:
| 1 | Income Yield is historically the single most important explanatory factor for income-generating assets |
| 2 | Growth The extent to which income is expected to change over time |
| 3 | Revaluation The price per unit of income likely to apply at the end of the period (typically, 10 years) |
Capital Market Assumptions - April 2025
Key takeaways
Major change is underway in the global economy. In domestic policy: the United States has undertaken to deregulate the economy, to shrink the Federal government and to bring down the pace of immigration; the European Union has shaken off self-imposed fiscal rules to dramatically increase investment in defence and infrastructure; and China has launched a ‘Special Action Plan’ to rebalance the economy through boosting domestic consumption. On the international front, the protectionist turn taken by the US has injected uncertainty into global production chains while hopes for peace in Ukraine and conflicts around the world have ebbed and flowed.
With so much going on, our Capital Market Assumptions offer an opportunity to take a step back and consider the longer-term outlook for global asset markets. We firmly believe a focus on the starting point (what you pay today) is crucial even when considering returns on a 10-year horizon. With elevated market volatility, it’s worth emphasising that this update is based on data as at 31 March 2025. The overall message is consistent with recent updates where we have presented a picture of low expected returns in aggregate. We anticipate that a traditional 60% global equity, 40% global government bond portfolio will deliver a 4.4% annualised return for the next decade in nominal terms, when hedged into US dollars. This represents a modest improvement in the forward-looking return opportunity, with an uplift across both equities and fixed income.
We continue to see a need for considerable value-add from asset allocation and security selection decisions as well as from identifying investments that will benefit from structural growth tailwinds to achieve investment objectives.
Forecasts are inherently limited and modelling involves risks, assumptions and uncertainties, they are forward looking and are not guarantees nor a reliable indicator of future results. Actual returns could be materially higher or lower than projected. This information is not intended as a recommendation to invest in any particular asset class or strategy or as a promise of future performance.
Source: Ninety One proprietary Capital Market Assumptions as at 31 March 2025. These estimates are gross of fees (returns can be reduced by management fees and other expenses incurred) and reflect the view of Ninety One’s multi-asset team, whilst the views of other teams across Ninety One may differ. Details on our Capital Market Assumptions methodology available upon request.
General risks. Forecasts are inherently limited and modelling involves risks, assumptions and uncertainties, they are forward looking and are not guarantees nor a reliable indicator of future results. Actual returns could be materially higher or lower than projected. This information is not intended as a recommendation to invest in any particular asset class or strategy or as a promise of future performance. The value of investments, and any income generated from them, can fall as well as rise. Costs and charges will reduce the current and future value of investments. Where charges are taken from capital, this may constrain future growth. Past performance is not a reliable indicator of future results. If any currency differs from the investor's home currency, returns may increase or decrease as a result of currency fluctuations. Investment objectives and performance targets are subject to change and may not necessarily be achieved, losses may be made. Environmental, social or governance related risk events or factors, if they occur, could cause a negative impact on the value of investments.
