J.P. Morgan Asset Management Releases 2016 Long-term Capital Markets Assumptions, Presents Views on Strategic Portfolio Allocations and Realistic Return Expectations

NEW YORK, Oct. 29, 2015 /PRNewswire/ -- J.P. Morgan Asset Management today released its 2016 Long-term Capital Markets Assumptions (LTCMA) whitepaper, a carefully formulated, comprehensive perspective on long-term asset class returns and risks designed to guide investors when determining, reviewing and analyzing their strategic portfolio allocations. The LTCMA, celebrating its 20th anniversary, are constructed by some of the firm's most senior investors and present long-term return, risk and correlation estimates that encompass more than 50 asset and strategy classes, and are published for investors in 10 different base currencies.

"Our 2016 Assumptions anticipate a challenging investment environment, characterized by moderate economic growth, generally stable inflation and returns over the next 10-15 years that we expect to fall well short of those achieved during the past 30 years," said Michael Feser, Portfolio Manager and Managing Director, J.P. Asset Management Multi-Asset Solutions. "We see the search for attractive risk-adjusted returns spanning public and private markets globally and expect that diverging central bank policies and credit cycles, among other factors, will prevent a uniform global business cycle from emerging in the near term, emphasizing the importance of flexibility and diversification."

The whitepaper is broken down into five sections including a Foreword, Executive Summary, Thematic Articles, Assumption Articles and Data Matrices. The Thematic section analyzes a number of market trends and strategic asset allocation issues through articles that address the future of regulation, the private equity premium, modeling and managing fat-tailed market risks, and the evolution and current state of emerging markets equity. The Assumptions section explores factors, principles and reasoning underlying the firm's projections from an overall macroeconomic perspective before taking a deep dive into specific asset classes, including fixed income, equities, alternatives and foreign exchange. Key findings include:

• Macro Overview — The backdrop for this year's LTCMAs is best described as an environment of steady inflation and subdued long-term growth in the face of very divergent cyclical starting points across economies globally.

• Major Asset Class Assumptions — Changes to our assumptions year-over-year are nuanced and include: a deteriorating outlook for U.S. Treasury returns; improving but, in nominal return terms, still uninspiring public and private equity market return expectations; and relatively more attractive assumptions for credit, value added real estate and infrastructure.

• Implications — Based on a synthesis of results across our full dataset of over 50 asset classes, we find that the outlook for the 60% equity/40% fixed income investor has improved slightly, in terms of risk-adjusted returns. At the same time, the efficient frontier has rotated counterclockwise, in a way that suggests the expected return for relatively safer assets have fallen further, while the expected return for riskier assets has improved, relative to last year.

The research provides vital information to decision-makers in all investment sectors, including pension funds, wealth management, insurance companies, endowments and foundations. The Assumptions also form the investment principles around J.P. Morgan Asset Management's multi-asset portfolios, which include its defined contribution target date funds, multi-asset income funds and other custom strategies within the Solutions Group.

Please view the full 2016 Long-term Capital Market Assumptions whitepaper here.  

About J.P. Morgan Asset Management
J.P. Morgan Asset Management, with assets under management of $1.7 trillion, is a global leader in investment management. J.P. Morgan Asset Management's clients include institutions, retail investors and high net worth individuals in every major market throughout the world. J.P. Morgan Asset Management offers global investment management in equities, fixed income, real estate, hedge funds, private equity and liquidity. JPMorgan Chase & Co. (NYSE: JPM), the parent company of J.P. Morgan Asset Management, is a leading global asset management firm with assets of approximately $2.4 trillion and operations in more than 60 countries. Information about JPMorgan Chase & Co. is available at www.jpmorganchase.com.  

J.P. Morgan Asset Management is the marketing name for the asset management businesses of JPMorgan Chase & Co. and its affiliates worldwide.

SOURCE J.P. Morgan Asset Management

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