Prior to the 2007 financial crisis, investment managers could reasonably expect to obtain returns above 8% over the long-term, using a mix of investments. After 2007, while some investment managers have made excellent returns on the 2007 stock price rebound and then the energy run-up, the basic structure of the investment world has changed for the worse.
And it may well not get better for a long time.
According to a new report issued last week by Steve Ambler and Craig Alexander of the C.D. Howe Institute, the fact of an ageing global population is resulting in slower growth worldwide. This creates a cascade effect that will make it very difficult to get returns above 4% in the coming decades.
This of course can effect the viability of pension funds to pay out their defined benefit obligations. For people who have their principal investments in defined contribution type plans, they face a related problem in that their retirement projections may be way off, which could require them to work much longer than planned or scale back on their retirement plans and budgets.
You can read the full report, “One Percent? For Real? Insights from Modern Growth Theory
about Future Investment Returns” by clicking this link (which will open the report in a new window) …
