MARCH 2014
Capital Market Line
GLOBA L A SSE T A LLOC ATION TE A M
MICHAEL J. KELLY, CFA
Managing Director, Global Head of Asset
Allocation & Structured Equities
TATSUSHI MAENO, CFA
Managing Director, Head of
Investments PineBridge Japan
HANI REDHA
Vice President
PineBridge, Middle East
MAGALI AZEMA-BARAC. PhD. CFA
Managing Director, Global Asset Allocation
PineBridge Australia
PETER HU, CFA
Vice President, Sr. Analyst,
Asset Allocation
MICHELLE GAO
Analyst, Asset Allocation
Capital Market Line
TABLE OF CONTENTS
I. EXECUTIVE SUMMARY ................................................................................................2
INSIGHTS FROM TODAY’S CML ......................................................................................5
THE CONVICTIONS DRIVING OUR CML ......................................................................... 8
ABOUT THE CAPITAL MARKET LINE ...............................................................................8
II. ASSET CLASS UPDATES.......................................................................................... 10
EQUITY .......................................................................................................................... 11
FIXED INCOME ............................................................................................................. 12
CURRENCY ................................................................................................................... 14
PRIVATE EQUITY ........................................................................................................... 15
HEDGE FUNDS ............................................................................................................. 17
REAL ESTATE ................................................................................................................ 18
COMMODITIES ............................................................................................................. 18
SUMMARY TABLES ...................................................................................................... 19
CONTACT INFORMATION ..........................................................………………………………24
Certain statements provided herein are based solely on the opinions of PineBridge Investments and are
being provided for general information purposes only. Any opinion provided on economic trends should
not be relied upon for investment decisions and is solely the opinion of PineBridge Investments.
This material must be read in conjunction with the Disclosure Statement
1
I.
2
Executive Summary
CAPITAL MARKET LINE AS OF 31/03/2014 (LOCAL CURRENCY VIEW)
Dot Size: Depicts the degree of correlation of the asset class to most others. Large dots are more
correlated with most others.
Color: Shows liquidity of the asset class. Green is the most liquid, orange may be less liquid in times of
market stress, and red represents the least liquid.
3
CAPITAL MARKET LINE AS OF 31/03/2014 (USD VIEW, UNHEDGED)
Dot Size: Depicts the degree of correlation of the asset class to most others. Large dots are more
correlated with most others.
Color: Shows liquidity of the asset class. Green is the most liquid, orange may be less liquid in times of
market stress, and red represents the least liquid.
4
INSIGHTS FROM TODAY’S CML
Despite two headline grabbing events in emerging markets (EM) since our last publication, namely
Argentina’s devaluation and the Ukraine situation, our view of the global outlook remains essentially
unchanged. True, Russia took unilateral action to protect their Black Sea fleet and to prevent the Ukraine
from entering NATO. Yet the Ukraine’s huge debt will now be “rescued” by the IMF and Russia’s neighbors
will increasingly look to the EU and away from Russia. While Argentina ignited severe currency weakness
throughout emerging currencies, at least for the month of January, this proved to be short-lived. Several
emerging central banks acted swiftly to raise interest rates, which the market responded to very positively.
While current accounts and growth rates may have softened, debt ratios (with the exception of China) and
foreign reserves continue to strengthen.
Instead, slow and steady transitions continue to be the watch word. EM is in a transition from being
driven by high and volatile external demand and capital flows to becoming more inwardly driven and
sustained. While EM’s slowing growth rate is currently raising uncertainty, young populations with
emerging middle classes remain an intermediate term driver of continued faster growth than in developed
markets. A shift in EM business models towards more self-determination, if successful, ultimately implies
lower not higher risk premiums.
In the US a different type of transition is underway, from liquidity fed markets to those driven by
fundamentals without policy support. By year end the persistent fiscal drag should have disappeared in
tandem with quantitative easing (QE). While Reinhart and Rogoff’s work suggests that it takes 7-9 years
to fully recover from most financial crises, this is often the result of 4-5 years of below trend growth during
the deleveraging process followed by several years of faster growth to catch back up to trend. Five years
have now passed since the financial crisis. The US government’s fiscal balances are recovering rapidly
and consumer and business balance sheets are in good shape. Most, including ourselves, expect a faster
and more sustainable pace of growth in the years ahead. US firms are now in the sweet spot of the credit
cycle. They are enjoying the double benefit from refinancing with low rates which increasingly is being
used to boost ROE by issuing debt to buy back equity. After the normalization of the yield curve, this free
lunch will need to be paid for and the credit cycle will turn with rising defaults long before this business
cycle turns down.
There is a global transition from low inflation to normal inflation. While this is not yet evident, and
substantial global slack remains, global expansion is gradually chipping away at this slack and prices are
all about change at the margin. US corporations have no intention to raise capacity and the restructuring
of China’s banking system is ending a system of financial repression that undercompensated China’s
consumers to channel subsidized funds into their manufacturing sector which resulted in overcapacity
depressing the prices of global goods.
Abenomics is attempting another transition. While currently led by competitive devaluation, other
changes are more subtle yet ongoing. There is new pressure for corporations to join the new JPX 400,
which is an index of above average ROE companies. This is fostering a greater focus on profitability. The
Topix’s price/book ratio is highly sensitive to its ROE level. Despite disappointment in the lack of one
large visible “third arrow”, many ‘below-the-radar’ measures continue to pass such as: relaxed visa
requirements (which has led to a surge in tourism), incentives for high-tech capital spending which
combined with real interest rates falling (from high levels due to deflation) to negative real rates (due to
5
the same nominal rates yet with positive inflation) should incentivize business to stop hoarding their
record cash. Special economic zones and lower patent filing costs for small business have also been
instituted.
With the world in transition, those who succeed should reap outsized rewards. We continue to see several
long-lasting themes. The commodity super-cycle will take a long time to unwind to the detriment of Latin
American and EMEA yet to the benefit of most of Asia. The long upward climb in interest rates will
continue. Until rates rise through a neutral level where they begin to restrain growth, the initial innings will
merely push investors out of fixed income into growth assets. We begin this process with a normally
sloped Capital Market Line (CML). As we pointed out last quarter, this is unlikely to foreshadow normal
returns ahead. Instead we see a low nominal return world yet with excess returns still quite normal owing
poor returns ahead for the risk free curve. Low nominal returns will have to coexist with volatility that has
been suppressed with QE and will now rise with tapering and transitioning.
This should be the year the dollar finally begins a long climb at the expense of most currencies, including
the Euro. Despite a better fundamental outlook in the US, we do not expect that this will translate into
better financial market performance. Fundamental improvement will largely be offset by the end of QE.
For equities, we favor Europe and Japan now where improving fundamentals will be amplified by liquidity
measures. In EM, while return prospects look quite high, so too does risk. We favor EM Asia over Latin
America and EMEA yet differentiation lies ahead. Stock markets like Mexico and India can do well. In
fixed income, we continue to see intermediate term value in local currency emerging debt and bank loans.
While we see inflation rising, this will not happen to the extent necessary to carry all real return
investments. We would continue to avoid commodities and still feel TIPS are overvalued. In contrast,
many pockets of real estate and timber continue to look attractive to us.
6
EXPECTED ANNUALIZED RETURNS OVER NEXT 5 YEARS
(FROM 31/03/2014 PRICES)
Note: PineBridge also produces CMLs for USD, EUR, JPY and AUD based investors. Each currency perspective includes a CML
assuming the currency is un-hedged, as well as a CML assuming the currency is fully hedged using today’s currency forward curves
(for hedged version, see back of report).
There is no assurance that forecasts will be attained.
7
THE CONVICTIONS DRIVING OUR CML
Developed markets de-leveraging, de-risking and re-regulation is slowly ending as headwinds to this
cycle’s global growth. Policy has shifted in Japan in a manner that is now stimulating global growth. In
Europe, at least policy is no longer oriented towards dragging global growth. Yet new medium-term
oriented headwinds have now surfaced in many of the emerging countries. China’s previous rapid pace
was believed to be occurring within an underleveraged economy. Now it is known that its debt/GDP is no
longer low. It’s now at an average level after spiking since the crisis. This is one less underutilized
balance sheet as a source of global growth. This debt build-up had been hidden in local financing
vehicles, and while it lasted, financed a rapid infrastructure build-out that created a commodity boom
pulling along commodity exporters throughout Latin America and EMEA. This infrastructure build, as well
as its associated commodity boom, will now cool for many years to come.
An uptick in the US, Japan, and Europe is offsetting most of the deceleration from the emerging markets.
For the moment a low nominal world has set in (lower nominal GDP growth, lower earnings growth, lower
nominal returns). This low nominal growth, juxtaposed to high debt levels, will concern central banks
delaying their complete exits from unusually generous monetary policies as long as inflation remains at
bay. Liquidity-driven markets, where returns on growth assets outperform their fundamentals, are likely
with us a bit longer, yet will surely disappear over our five year horizon requiring a hand-off to
fundamentals which need to grow faster at some point. The US will be the first to attempt the handing off
of this baton.
The end of extraordinary monetary accommodation, in isolation, will put downward pressure on P/E’s. Yet
low nominal worlds inhibit capital investment while encouraging higher dividend payout ratios. This
should put upward pressure on P/E’s. Since 2009 we have been forecasting rising P/E’s. From here on,
we do not see P/E ratios changing very much over our forecast horizon, certainly not in the US which has
experienced most of the world’s P/E escalation in recent years.
The amount of time put behind us since the 2008 financial crisis is now healing memories. The stop-andgo pattern of the economy from 2010-2012 pre-empted imbalances from forming. We now head into
2014 with conditions more similar to mid-cycle than most recoveries in their sixth year. A “great rotation”
merely requires portfolio mixes to adjust back to normal as the world slowly gets back onto sustainable
feet. We are coming off a 30 year bull market in “risk-free” assets, so this rotation back towards risk
assets is expected to take time. Yet the stair step pattern towards sustainable growth and higher rates
has clearly begun. Until rates pierce through “neutral levels” we see a gradual increase in rates as
positive for risk assets, spurring investors to rotate away from Treasuries without the prospect that these
higher rates will restrain growth.
8
ABOUT THE CAPITAL MARKET LINE
The Capital Market Line (CML) is a tool developed and maintained by the Global Asset Allocation Team. It
has served as the team’s key decision support tool in the management of our asset allocation products.
In recent years, it has also been introduced to provide a common language for discussion across asset
classes as part of our Investment Strategy Insights meeting. It is not intended to represent the return
prospects of any PineBridge products, only the attractiveness of asset class indices compared across the
capital markets.
The CML quantifies several key fundamental judgments made by the Global Asset Allocation Team after
dialogue with our specialists within the asset class. Top-down judgments regarding the fundamentals we
believe will be the largest determinants of returns over time drive the CML construction. While top-down
and the responsibility of the Asset Allocation Team, these judgments are influenced by the interactions
and debates with our bottom-up asset class specialists, thus benefiting from PineBridge’s multi-asset
class, multi-geographic platform. The models themselves are intentionally simple to focus attention and
facilitate a transparent and inclusive debate on the key drivers for each asset class. These discussions
take place and result in 19 interviews focused on determining 5 year forecasts for 83 fundamental
metrics. When modeled and combined with current pricing this results in our annualized expected return
forecast for each asset class over the next five-years. The expected return for each asset class, together
with our view of forward looking risk for each asset class as defined by volatility, forms our CML.
The slope of the CML indicates the risk/return profile of the capital markets based on how the five year
view is currently priced. In most instances, the CML slopes upward and to the right, indicating a positive
expected relationship between return and risk. However, our CML has, at times, become inverted (as it
did in 2007), sloping downward from the upper left to the lower right, indicating risk-seeking capital
markets that were not adequately compensating investors for risk. We believe that the asset classes that
lie near the line are close to fair value. Asset classes well above the line are attractive (over an
intermediate-term perspective) and those well beneath the line are deemed unattractive.
We have been utilizing this approach for a dozen years and have learned that, if our judgments are
reasonably accurate, asset classes will converge most of the way toward fair value much sooner than
five-years. Usually, most of this convergence happens over one to three years. This matches up well with
our preferred intermediate-term perspective in making asset allocation decisions.
9
II. Asset Class Updates
10
EQUITY
For some time now we have expected developed markets normalized ROEs and growth rates to lag their
historic averages. Yet with this business cycle’s major risks now on the decline for most DM economies,
we have been inching up ROE and EPS growth rates. We are now beginning to also inch up dividend
payout ratios as a consequence of the low nominal growth world that is emerging. At the same time, the
world is experiencing de synchronous trends and we have had to inch down emerging market ROE and
EPS growth rates for most quarters in the last two years. This quarter, we did not have to nudge these
any further.
The valuation and ROE in European bank could be improved after the ECB comprehensive review and
AQR but not to the level seen before Lehman crisis. The US firms are now in the sweet spot of the credit
market. They enjoy double benefit from refinancing with lower rate and raising ROE by issuing debt to buy
back equity. In Japan, GPIF reform and high ROE index “JPX 400” could be incentive for company
management to raise ROE. The more management pay attention to ROE, the higher dividend they pay.
The long term structural reform including labor market reform, education reform, financial system reform,
energy reform in Mexico is underway. In the short term, implementation of those reforms is not easy and
the cut in fiscal spending could damp the growth rate temporarily. There is a cautious view for the Pena
Nieto’s reform initiative but it is unfounded. The negative is he tries to do too many things simultaneously
and the benefit cannot be felt by people in the short term and the expectation level is so high that it easily
become disappointment.
In retrospect, the last 5 to 10 years was a sweet spot for EM because investment led growth in China
created a commodity super cycle for Latin America and EMEA. Earnings growth outpaced GDP growth.
While demographic advantages still persist for many EM countries, a gradual winding down of China’s
investment spending spree and related softening of commodities are more powerful forces in the
intermediate term. Brazil spent the benefit of higher commodity prices on consumption and no longer
has the balance sheet to stimulate growth. Like South Africa, rapid wage growth in Brazil for the last 5-7
years is now becoming problematic. India faces an important, yet unpredictable election this spring.
11
FIXED INCOME
Muddle Through for Developed Markets
While the initial move up in the yield curve led to a steepening, eventually it will morph into a flattening as
policy rates begin to rise in 2015. Real interest rates are still low for the pace of nominal growth. Once
zero interest rate policies are removed in 2015, the curve can normalize.
We expect consensus to be surprised with upside to their inflation expectations. 40% of CPI is shelter
and house prices have risen significantly over the last two years.
In a rising rate environment, the current yield differential between the US and Germany/Japan is wide
enough to make US Treasury’s attractive in this sovereign circle.
Corporate investment grade credit has benefited up until now from the noticeable lack of business
confidence. Mergers, dividend hikes, and other shareholder friendly activity have just begun to percolate
and should gradually pick up from here.
US TREASURY YIELD CURVE AS OF 31/03/2014
Source: PineBridge Investments, Board of Governors of the Federal Reserve System (as of 31/03/2014)
12
Emerging Markets
Despite January’s spike in volatility initiated by Argentina’s default, emerging markets sovereign and
corporate debt still looks poised for modest ongoing structural upgrading. We do not expect those
emerging currencies that experienced currency declines to be impacted with respect to their default
rates. Relative to history, more outstanding EM debt is now denominated in local currency where debt
service ability no longer falls with the currency. Yet higher policy rates to defend currency levels will lead
to slower EM growth. In our view this will merely slow, yet not reverse the structural upgrading backdrop
supporting the medium term prospects for these debt markets and currencies.
Credit and Inflation
The macro economy and credit quality/credit cycle will not necessarily both peak out at the same time.
We expect the next down turn in the credit quality cycle to start at the end of 2016 to mid-2017 period.
We see new issues continuing to aim at dividend recapitalizations and M&A. Those issues will not default
in the first year but will start to default in the 2nd and 3rd year. After the normalization of the yield curve,
corporate will pain from the higher refinancing cost for the first time.
Source: Barclay’s Capital (as of 31/03/2014)
13
CURRENCY
The dollar has been undervalued versus other DM currencies for some time. Now that tapering has begun,
so too has a long ascent of the USD. With forgiving flows no longer likely into EMD, investors have
become very leery of EM currencies, especially where the underlying country is posting current account
deficits (like Brazil, India, Indonesia, Turkey, and South Africa - - the fragile five).
The Bank of Japan (BOJ) continues to ramp up its quantitative easing (QE) in an attempt to restart growth
and to end deflation. This will continue to depreciate the Yen given the BOJ's explicit shift in stance
towards targeting 2% inflation. Our new Yen forecast assumes it moves further away from purchasing
power parity, dropping into the 110-115 range given the heavy dosage of QE from the BOJ just as other
central banks wind down their own QE programs.
The European Central Bank (ECB) has maintained a shrinking balance sheet in contrast to the Fed’s and
the BOJ’s which has continued to support a strong Euro. This could change should the ECB adopt some
form of unconventional policy, as they appear increasingly likely to do.
Commodity orientated currencies, which have been quite strong for the last 10 years have given way to
the reality of slower exports into China. Despite the recent declines in these currencies, we still see
further downside over the next five years.
The most important issue over our CML horizon continues to be the stress between EM and DM
currencies. With China’s sudden growth challenges, its suppression of the RMB to the USD at an
undervalued exchange rate will persist longer than previously expected. China continues to assert that the
RMB will be fully convertible within five years. This now looks like a more challenging trajectory.
14
ALTERNATIVES
Private Equity
Vintage has a significant impact on private equity returns. As a result, our work considers what median
managers are likely to achieve from this vintage year forward.
The fund-raising environment is improving. Strategic M&A appears to be picking up, offering exits for PE.
With listed asset classes likely to slow in appreciation, the performance of private equity (which has
meaningfully underperformed in the past five years) is likely to improve compared to listed equity. The IPO
window is also offering cash out opportunities for venture where very high initial values are being created
in the top 5 space like Tesla, Twitter, and Facebook. Although these valuations appear lofty, comparing
with the 1999 and 2000 tech bubble period, today’s new issues have real operating business models.
Mid and small deal markets, which had been ignored by the credit markets are now showing initial signs
of reverting to more normal lending with the return of traditional lenders. At the larger end of private
equity, although the credit markets are supportive at the moment, deal sizes are not as big as pre 2007
with a new reluctance of large PE shops to band together in deals.
FUNDRAISING ENVIRONMENT
SORUCE:PITHBOOK 31/03/2014
For illustrative purposes only. We are not recommending or soliciting any action based on this material.
Exit Environment (Number of exits)
15
For illustrative purposes only. We are not recommending or soliciting any action based on this material.
Source: Pitchbook 31/03/2014
16
Hedge Funds
Even after a more respectable 2013, the HFRI has still delivered extremely poor returns over the past fiveyears compared to most 60/40 oriented benchmarks. As generous interest received for shorting fell to
zero, and fees remained sticky, the asset class disappointed. Despite this, flows have continued to be
quite firm, first as equity replacements post-2008 and now as fixed income replacements as many worry
about rising rates. Flows into the asset class create crowded trades and make it more difficult for the
HFRI to outperform. As an offset, the decline in volatility has brought down correlations between
securities allowing security selectors to perform better. Leverage is lower for most institutional hedge
funds, and so is volatility. Fees are finally showing some flexibility, having not earned their keep for an
extended period. Yet given LIBOR’s low level, absolute returns while better than the past few years could
still be quite disappointing during the first half of our five year horizon.
For illustrative purposes only. We are not recommending or soliciting any action based on this material.
Diversification does not ensure a profit or protect against a loss.
Source: Goldman Sachs (as of 31/03/2014)
17
Real Estate
Our real estate expected return model deals only with US commercial real estate.
QE has been a positive for real estate by raising expected net operating income growth in the out years
(due to anticipated inflation down the road) while lowering cap rates today. Cyclically speaking,
commercial real estate delinquency rates for bank-held paper have dropped, while the commercial
mortgage-backed securities (CMBS) market has bounced off its 2009 bottom. Both have contributed to
rejuvenated transactions. Fundamentals also continue to improve. Net absorption of US commercial real
estate continues to slowly tighten, while net operating income for most US commercial real estate is now
rising. The asset class remains in a slowly improving mode.
Commodity Index Futures
With the demand side of the industrial metals commodity super cycle topping out over the next few years,
courtesy of China, the outlook is not favorable. What is known is that return on invested capital for
commodity-oriented businesses and infrastructure providers has been at extremely high levels for an
extended period. Not surprisingly, supply is now appearing at the worst time imaginable for many
industrial commodities. The end of QE takes away the only appeal for precious metals, which act more as
a currency than a commodity.
These impacts will not be confined to the commodity space and will spill over to the commodity currencies
and equity markets in the natural resource rich countries like Australia, Canada, and Brazil.
Eventually, enough financial players will leave this space and commodity future curves will become
meaningfully backward dated offering return should the spot rates find a bottom. Markets have already
moved in that direction for commodity future curves. Despite this, the expected return for commodity
futures, which incorporates this benefit, is still unattractive.
18
EQUITY SUMMARY IN LOCAL CURRENCY TERMS
19
FIXED INCOME SUMMARY IN LOCAL CURRENCY TERMS
20
FIXED INCOME SUMMARY IN LOCAL CURRENCY TERMS
5yr Forecast
TIPS
Maturity
Real Yield
Exp Return
Volatility
1.15%
0.99%
6.10%
5yr Forecast
Muni
Maturity
% Spread vs TSY
Exp Return
Volatility
100.00%
2.67%
4.90%
5yr Forecast
Inter Corp
Maturity
Spread vs. TSY
Net Default
Exp Return
Volatility
1.00%
-0.15%
1.63%
3.70%
5yr Forecast
Long Credit
Maturity
Spread vs. TSY
Net Default
Exp Return
Volatility
1.60%
-0.20%
3.14%
7.65%
5yr Forecast
MBS
Maturity
Excess Return
Default
Exp Return
Volatility
-0.30%
0.00%
1.03%
2.75%
5yr Forecast
CMBS
Maturity
Spread vs. TSY
Net Default
Exp Return
Volatility
1.30%
-0.50%
1.26%
4.80%
5yr Forecast
ABS
21
Maturity
Spread vs. TSY
Net Default
Exp Return
Volatility
0.65%
0.00%
1.34%
2.55%
Current
8.50
0.42%
5yr Average
10yr Average Pre 2007 10Y
0.31%
1.14%
2.92%
8.34%
6.73%
6.36%
4.13%
Current
10.00
93.48%
5yr Average
111.19%
102.83%
84.51%
5.25%
4.93%
4.63%
4.08%
Current
5.03
0.69%
5yr Average
1.60%
-0.12%
1.65%
-0.10%
1.10%
-0.06%
3.61%
4.31%
4.13%
3.56%
Current
23.97
1.54%
5yr Average
1.93%
-0.12%
1.78%
-0.10%
0.98%
-0.06%
10.11%
9.78%
9.08%
7.40%
Current
6.62
5yr Average
1.62%
2.78%
Current
3.69
0.89%
5yr Average
2.78%
2.45%
0.98%
-0.41%
2.63%
7.66%
6.92%
4.63%
Current
2.70
0.39%
5yr Average
0.76%
1.13%
0.65%
-0.49%
1.38%
3.25%
3.00%
2.48%
10yr Average Pre 2007 10Y
10yr Average Pre 2007 10Y
10yr Average Pre 2007 10Y
10yr Average Pre 2007 10Y
2.72%
2.52%
10yr Average Pre 2007 10Y
10yr Average Pre 2007 10Y
FIXED INCOME SUMMARY IN LOCAL CURRENCY TERMS
5yr Forecast
High Yield
Bank Loan
EM Sovereign
(Dollar
Denominated)
Maturity
Spread vs. TSY
Net Default
Exp Return
Volatility
3M Libor Exp Return
Credit Equivalent Spread
Price
Net Default
Exp Return
Volatility
Maturity
Spread vs. TSY
Net Default
Exp Return
Volatility
Current
6.55
3.19%
5yr Average
5.84%
-2.56%
5.67%
-2.93%
5.15%
-2.93%
4.94%
9.41%
7.89%
6.48%
5yr Forecast
1.86%
4.00%
0.99
-1.65%
4.16%
5.25%
Current
0.09%
4.82%
0.98
5yr Average
1.98%
7.18%
0.88
-1.67%
4.07%
11.04%
5yr Forecast
Current
13.26
3.11%
5yr Average
3.09%
3.08%
6.19%
10.82%
8.81%
8.21%
13.18%
Current
7.68
3.18%
5yr Average
3.86%
3.46%
3.00%
5.87%
7.51%
6.56%
5.33%
Current
6.77
4.79%
5yr Average
4.68%
4.00%
2.93%
9.94%
10.21%
6.92%
3.05%
5.00%
-2.85%
0.55%
6.50%
2.95%
-0.40%
4.66%
7.50%
5yr Forecast
EM Corporate
(Dollar
Denominated)
Maturity
Spread vs. TSY
Net Default
Exp Return
Volatility
3.05%
-0.55%
4.03%
6.50%
5yr Forecast
EM Local FX
(Sovereign)
22
Maturity
Spread vs. TSY
Net Default
Exp Return
Volatility
3.05%
-0.40%
6.65%
7.00%
10yr Average Pre 2007 10Y
10yr Average Pre 2007 10Y
2.05%
6.27%
3.36%
0.90
-1.31%
-1.11%
7.92%
2.10%
10yr Average Pre 2007 10Y
10yr Average Pre 2007 10Y
10yr Average Pre 2007 10Y
ALTERNATIVES SUMMARY IN LOCAL CURRENCY TERMS
FoHF
5yr Forecast Current
1.86%
0.05%
3.00%
-0.44%
-0.70%
4.16%
6.00%
3.09%
5yr Average
0.09%
2.69%
10yr Average
1.56%
2.02%
4.76%
4.59%
5yr Forecast Current
7.25%
7.38%
8.52%
15.15%
14.79%
5yr Average
7.10%
10yr Average
7.53%
16.50%
13.81%
5yr Forecast Current
8.07%
5.00%
-1.00%
-1.00%
12.07%
22.00%
12.96%
5yr Average
10yr Average
World Listed Equity
Illiquidity Premium
Vintage Year Adjustment
Exp Return
Volatility
22.08%
22.95%
5yr Forecast Current
-0.37%
6.62%
0.08%
6.34%
16.95%
8.43%
5yr Average
10yr Average
Spot Price Change
Future Curve Premium
CPI
Exp Return
Volatility
18.48%
16.89%
3M Libor Exp Return
Exp Risk Premium
Survivorship Bias Adj
Exp Return
Volatility
Cap Rate
US Real Estate
Exp Return
Volatility
Private Equity
Commodity
23
5.00%
CONTACT INFORMATION
PineBridge Investments Global Asset Allocation Team
MICHAEL J. KELLY, CFA
Managing Director, Global Head of Asset Allocation & Manager Selection
+1 646.857.8156
[email protected]
MAGALI AZEMA-BARAC, PhD, CFA
Managing Director, Global Asset Allocation
+61 2 8005 8490
[email protected]
TATSUSHI MAENO, CFA
Managing Director, Head of Investments, PineBridge Japan
+81 3 52085843
[email protected]
PETER HU, CFA, FRM
Vice President, Asset Allocation
+1 646.857.8155
[email protected]
HANI REDHA
Vice President, Investment Management, PineBridge Middle East
+ 973 17111860
[email protected]
MICHELLE GAO
Analyst, Asset Allocation
+1 646.857.8585
[email protected]
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