Capital market assumptions

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.

Oct 1, 2021

Multi-Asset team
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.
Multi-Asset team

This microsite allows you to probe our methodology, assess how effective our assumptions have been historically, and access our latest views and case studies. To foster a sense of dialogue, we include a curated list of questions we have received from various stakeholders and our responses. We hope this research is a helpful complement to your own thinking as you develop your views.

The approach we have taken:
  1. Establishes a structured framework to determine possible future returns, based on three core drivers to clarify thinking – income, growth and reversion;
  2. Effectively distinguishes between high - and low prospective return scenarios, underpinning successful decisions on the direction of future return; and
  3. Currently demonstrates how challenging it is to secure attractive returns from a static asset allocation, therefore demanding thoughtful allocation and selection choices
Keeping you updated

We intend to revisit our assumptions on a semi-annual basis, given the usually slow-moving nature of long-term returns. We will supplement the end-March and end-September updates should it be required by market events.

Capital market assumptions

Key takeaways
Historical effectiveness
Fixed income
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This section is a summary of our approach; more detail may be found in the Methodology section.

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)

This section is a summary of our approach; more detail may be found in the Methodology section.

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.

Important information
Source: Ninety One proprietary capital market assumptions as at 30 September 2021.
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.

Our expected returns estimates are for illustrative purposes only, are not a guarantee of performance and are subject to change. They are provided merely as a framework to assist in the implementation of an investor’s own analysis and an investor’s own view on the topic discussed herein. They should not be relied upon as recommendations to buy or sell securities. Forecasts of financial market trends that are based on current market conditions constitute our judgment and are subject to change without notice. We believe the information provided here is reliable, but do not warrant its accuracy or completeness. The outputs of the assumptions are provided for illustration/discussion purposes only and are subject to significant limitations. Expected return estimates are subject to uncertainty and error. Expected returns for each asset class are conditional on an economic scenario; actual returns in the event the scenario comes to pass could be higher or lower, as they have been in the past, so an investor should not expect to achieve returns similar to the outputs shown herein. Because of the inherent limitations of all models, potential investors should not rely exclusively on the model when making a decision. Unlike actual portfolio outcomes, the model outcomes do not reflect actual trading, liquidity constraints, fees, expenses, taxes and other factors that could impact the future returns. Note that these asset class assumptions are passive, and do not consider the impact of active management. All estimates in this document are in US dollar terms unless noted otherwise. The final total returns are converted from logarithmic to geometric estimates. This means that the components of the return breakdown may not sum to the total return. While useful for modelling and calculation purposes, the logarithmic return is theoretical (assumes continuously compounding returns) whereas the geometric estimate reflects practical experience (reflects discrete periods of compounded returns).