Darragh O'Dowd

Head of Multi-Asset Solutions

Today, ILIM publishes its updated long term expected returns for a range of asset classes. After such a strong 2024, particularly for equities, we remain very positive in terms of the long-term returns investors should expect from global stock markets and believe there are compelling opportunities available across a range of asset classes.

In addition, we have identified 3 key investment trends that investors should consider when positioning their portfolios for the long-term, which the team explores in more detail below. 

Key takeaways 

We believe that AI will continue to underpin equity markets and its impact will begin to extend beyond the initial beneficiaries who facilitated the build out to those who adopt AI into their business models and product offerings, boosting earnings growth. This leaves our long-term expected return for equities broadly unchanged compared to last year at around 5.5%. 

European Sovereign bonds also offer a bright spot for investors. Following the highest rates of inflation and most aggressive monetary policy tightening in 40 years, bond yields have reset higher from their Covid lows in 2020, back to more normal levels, well above those that were evident post quantitative easing after the global financial crisis when yields were negative in some cases across European markets. Yields are at levels which offer an attractive income stream to investors and are now better positioned to offer downside protection in a ‘risk off’ environment.

Property is another highlight. The stabilisation in interest rates means that pricing is now at an attractive level in our view and after a challenging few years, increased activity both domestically and within the European real estate market is providing reasons for optimism. European real estate in particular looks attractive with rental yields of 5-5.5% on offer, and this coupled with an expected fall in policy rates and expected rental growth underpins our increased expected return.