House View by the Chief Investment Office
How to achieve 5% returns in today's world
What was once as easy as abc has become quite challenging.
8 December 2016 | Tags: Investing
Reading time: 4 minutes
Ten years ago, generating returns above 5% was relatively simple. Today, with interest rates close to record lows, it is much more difficult, but still achievable.
Interest rates available on cash have been pushed to record lows, as central banks have attempted to revive weak economies. Investors have sought returns elsewhere, but the prices of investment grade bonds, high yield bonds, and equities have now all been pushed up. The search for yield could take on new impetus in 2017, with inflation rising even more quickly than interest rates.
We can’t reasonably expect more return without more risk. And aiming for any set return level if one cannot realistically cope with the associated risk is always a bad strategy.
But assuming risk tolerance is suitably high, we see three ways investors can consider to boost returns in 2017:
In a low-yield world, investors need either to lower their return expectations or take on more risk. US equities, EM equities, US senior loans, and alternatives (hedge funds and private markets) could all help investors boost returns in 2017.