Long-Term Return Expectations

How do we formulate expectations for long-term returns on the asset classes involved in the SAA? One approach would be to rely exclusively on the historical record. We will look at this in the first section. Another approach is to base our expectations on more forward-looking indicators such as longer-term macro-fundamentals, models of return and valuations. We will look at how this applies to risk-free government bonds, credit and equities in the subsequent sections.