The idea that we have entered a “low return” world is now consensus. The arguments are based on a combination of fundamental macro factors (a low growth world) and extended structural valuations in equity and debt markets, suggesting significant return headwinds. Consistently achieving solid real returns in this environment will be challenging. That said, we believe CPI+5% pa over the medium term is still an appropriate and achievable return objective. This view is based on several key ideas: 1) Valuation challenges across asset markets are not uniform 2) Markets rarely move in straight lines and volatility should provide opportunity 3) Active management will play a critical role in capturing upside but more importantly in avoiding losses. This article provides our view on the return outlook across different asset classes and draws seven key implications for investors seeking a 5% real return over the medium term. (VIEW LINK)


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