BNY Mellon Investor Solutions Releases 10-Year Capital Market Assumptions, Advising Investors Consider Diversification, Search for Yield and Inflation Protection

NEW YORK, Dec. 9, 2021 /PRNewswire/ -- BNY Mellon Investor Solutions today released its annual 2022 10-Year Capital Market Return Assumptions (CMAs), which provides 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 insights for the 2022 10-year capital market assumptions yield a mixed picture for asset class returns as compared to 2021 with the global economy and markets still recovering. The 10-year return forecasts are generally lower compared to last year, with the exception of fixed income returns, which are slightly better due to modestly higher starting-point yields. Equity markets are expected to deliver mid-to-high single-digit returns annualized over the next decade, slightly below the 10-year forecast from last year. Alternative asset classes are likely to produce low-to-high single-digit returns, as strategies most sensitive to inflation are expected to strengthen. However, with alternative asset classes manager selection is paramount and returns delivered by highly skilled performing managers will likely easily exceed these expected returns.

"We take a multi-dimensional approach to developing our capital market assumptions, including higher inflation, a moderated pace of growth and the expected reduction in extremely accommodative policy and current capital market conditions," said Sinead Colton Grant, global head of BNY Mellon Investor Solutions. "The largest change relative to the 2021 Capital Market Assumptions is in our expectation for higher inflation. Similar to our 2021 investment assumptions, we recommend that investors consider diversification, inflation protection and anticipate that private market assets will play an increasingly important role in goals-based, long-term policy portfolios."

Asset Class Assumptions

What follows is BNY Mellon Investor Solutions' 10-year assumptions for equity, fixed income and alternative asset classes return forecasts:

Equity Markets: After robust equity returns over the past two years, we anticipate mid-to-high single-digit returns due to slowing growth rates and stretched valuations. In the U.S., developed markets outside of the U.S. and emerging markets, BNY Mellon Investor Solutions anticipates real earnings growth will be in line with the expectation of regional real GDP growth.

• 5.9% U.S. Equity
• 5.8% Int'l developed
• 7.6% Emerging Markets
• 5.3% Global REIT

Fixed Income Markets: Though market yields are expected to rise modestly, they remain historically low for the time being due to the abundance of monetary and fiscal response. Fixed income returns are forecast to be low, but interest payments may offset some potential principal loss due to a rise in interest rates.

• 1.2% U.S. Aggregate
• 1.9% U.S. High Yield
• 0.3% Global Agg. Ex-U.S.
• 3.8% EM Local Currency

Alternatives: BNY Mellon Investor Solutions anticipates expected returns for alternative asset classes will generally be in line with publicly traded markets on a risk-adjusted basis plus incremental return for alpha and liquidity. Alternative asset class returns are mixed, with particular strength in asset classes most sensitive to inflation. Given wide return dispersion among strategies, manager selection is critical.

• 3.2% Absolute Return
• 3.9% Hedge Funds
• 7.9% U.S. Private Equity
• 4.7% U.S. Core Real Estate

Please view the full 2022 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 – 2 p.m. ET on Wed., Dec. 15, 2021.

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 Wealth Management
For more than two centuries, BNY Mellon Wealth Management has provided services to financially successful individuals and families, their family offices and business enterprises, planned giving programs, and endowments and foundations. It has $307 billion in total client assets, as of September 30, 2021, and an extensive network of offices in the U.S. and internationally. BNY Mellon Wealth Management, which delivers leading wealth advice across investments, banking, custody, and wealth and estate planning, conducts business through various operating subsidiaries of The Bank of New York Mellon Corporation. A line of business within Wealth Management, BNY Mellon Investor Solutions includes the firm's institutional multi-asset solutions business. The Investor Solutions AUM/AUA is $30.8bn as of September 30, 2021. For more information, visit www.bnymellon.com or follow us on Twitter @BNYMellonWealth.

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 SEC.gov website or obtained upon request.

Media Contact: 
Ben Tanner
212-635-8676
[email protected]

SOURCE BNY Mellon Wealth Management