“The high equity returns of the second half of the 20th century were not normal; nor were the high bond returns of the last 30 years; and nor was the high real interest rate since 1980. While these periods may have conditioned our expectations, they were exceptional. The long-run averages documented in this Yearbook provide a more realistic guide to the future.
The projections we have made for asset returns over the next 20–30 years are simply our own best estimates. They will almost certainly be wrong, but we cannot predict in which direction. There will also be large year-to-year variations in return. They should also be viewed strictly as long-run forecasts, and they are not incompatible with short-term optimism or pessimism about particular asset classes.
As long-term forecasts for the next 20–30 years, we nevertheless believe our estimates are realistic. This is in stark contrast to some of the projections currently being made by many asset managers, retail financial product providers, pension funds, endowments, regulators and governments. Overly optimistic estimates of future returns are dangerous, not only because they mislead, but also because they can mask the need for remedial action.”