Capital market assumptions - September 2021

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.

1 oct 2021

Multi-Asset team
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.