BNY Mellon Investor Solutions Releases 10-Year Capital Market Assumptions, Indicating Higher Expected Returns from 2023 Forecasts Amid Continued Market Volatility

Published: Dec. 1, 2022 at 8:30 AM EST

NEW YORK, Dec. 1, 2022 /PRNewswire/ -- BNY Mellon Investor Solutions today released its annual 2023 10-Year Capital Market Return Assumptions (CMAs), which provide the firm's estimates for asset class returns, volatilities and correlations over the next decade to guide investors in developing their long-term policy portfolios.


The market volatility and asset repricing of the past year drove notable changes to this year's expectations. As a result, the 2023 edition of the 10-year capital market assumptions forecasted higher than expected returns across all three asset classes – equity markets, fixed income markets and alternatives – when compared to 2022 assumptions (see table for reference). Equity market expected returns have increased due to slightly higher long-term growth rates and upward valuation adjustments (most notably in emerging markets). Fixed income asset class expected returns have reverted to levels not seen in many years and are significantly higher compared to last year. Similarly, alternative asset class expected returns are generally higher and in line with publicly traded markets on a risk-adjusted basis plus incremental return for alpha and illiquidity.

"After a challenging and volatile year in financial markets, our 2023 CMAs reflect higher expected returns over the next 10 years for most asset classes," said Sinead Colton Grant, global head of BNY Mellon Investor Solutions. "While the expected returns of traditional assets have increased relative to our 2022 CMAs, we continue to believe that higher allocations to alternatives and private assets are critical components of fully diversified portfolios that generate more consistent long-term returns."

Asset Class Assumptions
What follows are BNY Mellon Investor Solutions' 10-year assumptions for equity, fixed income and alternative asset class return forecasts:

Equity Markets: Historically, there has been a reasonably strong relationship between corporate earnings growth and GDP growth over a long-term period. In the U.S., developed markets outside of the U.S. and emerging markets, the firm anticipates real earnings growth will be in line with regional GDP growth expectations.

-       6.5% U.S. Equity
-       6.9% Int'l Developed
-       9.3% Emerging Markets

Fixed Income Markets: Anticipated fixed income returns are expected to be notably higher for most asset classes primarily due to notably higher yields in 2022 compared to 2021.

-       4.1% U.S. Aggregate.
-       6.2% U.S. High Yield
-       2.8% U.S. Intermediate Municipal
-       3.0% Global Agg. Ex-U.S.
-       4.0% EM Local Currency

Alternatives: Expected returns for alternative asset classes are likely to be in line with publicly traded markets on a risk-adjusted basis, plus incremental return for alpha and liquidity. BNY Mellon Investor Solutions believes alternatives should continue to play a much greater role going forward for long-term investors.

-       4.3% Absolute Return
-       4.9% Hedge Funds
-       8.2% U.S. Private Equity 
-       6.0% U.S. Core Real Estate

Please view the full 2023 10-Year Capital Market Return Assumptions report and executive summary here.

To learn more about BNY Mellon Investor Solutions' CMAs, sign up here to attend the upcoming webinar from 1:00 – 2:00 pm ET on Dec. 7, 2022.

About the BNY Mellon Investor Solutions CMAs
These baseline assumptions are constructed annually for approximately 50 asset classes around the world. This is built from consensus views, which also reflect BNY Mellon Investor Solutions research on global market imbalances and the macroeconomic forecasts generated by BNY Mellon Investment Management Global Economic and Investment Analysis Group. The intention is to help guide investors in developing their long-term strategic asset allocations.

About BNY Mellon Investor Solutions
BNY Mellon Investor Solutions includes the firm's institutional multi-asset solutions business. Its mission is to leverage BNY Mellon's strengths as a leading asset management, wealth management and investment servicing firm to bring Outsourced Chief Investment Officer (OCIO), multi-asset and advisory solutions to institutional investors worldwide. The BNY Mellon Investor Solutions AUM/AUA is $26.5bn as of September 30, 2022. For more information, visit here.

This material is provided for illustrative/educational purposes only. This material is not intended to constitute legal, tax, investment or financial advice. Effort has been made to ensure that the material presented herein is accurate at the time of publication. However, this material is not intended to be a full and exhaustive explanation of the law in any area or of all of the tax, investment or financial options available. The information discussed herein may not be applicable to or appropriate for every investor and should be used only after consultation with professionals who have reviewed your specific situation.

BNY Mellon Investor Solutions, LLC is an investment adviser registered as such with the U.S. Securities and Exchange Commission ("SEC") pursuant to the Investment Advisers Act of 1940, as amended. BNY Mellon Investor Solutions, LLC is a subsidiary of The Bank of New York Mellon Corporation. BNY Mellon Investor Solutions, LLC business is described in Form ADV, Part 1 and 2, which can be obtained from the website or obtained upon request.

Media Contact: 
Zoey Gottlieb
Prosek Partners

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