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The views expressed herein include those of the Neuberger Berman Multi-Asset Class (MAC) team and Neuberger Berman’s Asset Allocation Committee. The Asset Allocation Committee is comprised of professionals across multiple disciplines, including equity and fixed income strategists and portfolio managers. The Asset Allocation Committee reviews and sets long-term asset allocation models, establishes preferred near-term tactical asset class allocations and, upon request, reviews asset allocations for large diversified mandates. Tactical asset allocation views are based on a hypothetical reference portfolio. The views of the MAC team or the Asset Allocation Committee may not reflect the views of the firm as a whole and Neuberger Berman advisers and portfolio managers may take contrary positions to the views of the MAC team or the Asset Allocation Committee. The MAC team and the Asset Allocation Committee views do not constitute a prediction or projection of future events or future market behavior. The information in this material may contain projections, market outlooks or other forward-looking statements regarding future events, including economic, asset class and market outlooks or expectations, and is only current as of the date indicated. There is no assurance that such events, outlook and expectations will be achieved, and actual results may be significantly different than that shown here. The duration and characteristics of past market/economic cycles and market behavior, including any bull/bear markets, is no indication of the duration and characteristics of any current or future be market/economic cycles or behavior. Information on historical observations about asset or sub-asset classes is not intended to represent or predict future events. Historical trends do not imply, forecast or guarantee future results. Information is based on current views and market conditions, which will fluctuate and may be superseded by subsequent market events or for other reasons. Any target returns referenced reflect client established return objectives. There is no guarantee that any target returns will be achieved or that an investment strategy will be successful.
A bond’s value may fluctuate based on interest rates, market conditions, credit quality and other factors. You may have a gain or loss if you sell your bonds prior to maturity. Of course, bonds are subject to the credit risk of the issuer. If sold prior to maturity, municipal securities are subject to gain/losses based on the level of interest rates, market conditions and the credit quality of the issuer. Income may be subject to the alternative minimum tax (AMT) and/or state and local taxes, based on the investor’s state of residence. High-yield bonds, also known as “junk bonds,” are considered speculative and carry a greater risk of default than investment-grade bonds. Their market value tends to be more volatile than investment-grade bonds and may fluctuate based on interest rates, market conditions, credit quality, political events, currency devaluation and other factors. High yield bonds are not suitable for all investors and the risks of these bonds should be weighed against the potential rewards. Neither Neuberger Berman nor its employees provide tax or legal advice. You should contact a tax advisor regarding the suitability of tax-exempt investments in your portfolio. Investing in the stocks of even the largest companies involves all the risks of stock market investing, including the risk that they may lose value due to overall market or economic conditions. Small- and mid-capitalization stocks are more vulnerable to financial risks and other risks than stocks of larger companies. They also trade less frequently and in lower volume than larger company stocks, so their market prices tend to be more volatile. Investing in foreign securities involves greater risks than investing in securities of U.S. issuers, including currency fluctuations, interest rates, potential political instability, restrictions on foreign investors, less regulation and less market liquidity. The properties held by REITs could fall in value for a variety of reasons, such as declines in rental income, poor property management, environmental liabilities, uninsured damage, increased competition, or changes in real estate tax laws. There is also a risk that REIT stock prices overall will decline over short or even long periods because of rising interest rates. The sale or purchase of commodities is usually carried out through futures contracts or options on futures, which involve significant risks, such as volatility in price, high leverage and illiquidity.
Asset Class Assumptions and Estimates
Capital market assumptions used herein generally reflect Neuberger Berman’s Investment Strategy Group’s (ISG) forward-looking estimates of the benchmark return or volatility associated with an asset class. Estimated returns and volatility are hypothetical return and risk estimates generated by ISG. Estimated returns and volatility do not reflect the alpha of any investment manager or investment strategy/vehicle within an asset class. Information is not intended to be representative of any investment product or strategy and does not reflect the fees and expenses associated with managing a portfolio or any other related charges, such as commissions and surrender charges. Estimated returns and volatility are hypothetical and generated by Neuberger Berman based on various assumptions and inputs, including current market conditions, historical market conditions and subjective views and estimates. Capital market assumptions shown reflect ISG’s long-term (20+ years into the future) estimates, reflect both current and historical market conditions and are reviewed and revised at least annually. ISG also produces intermediate-term (5-7 years into the future) year capital market assumptions. If ISG’s intermediate-term (5-7 years into the future) capital market assumptions were used the results of the analysis would be different. ISG’s capital market assumptions are derived through a four step process which combines the weights of asset classes in the global market, historical returns of the asset class benchmarks, the relationship asset classes have to one another, and their returns in excess of the risk free rate. These hypothetical returns are used for discussion purposes only and are not intended to represent, and should not be construed to represent, predictions of future rates of return. Actual returns may vary significantly. Neuberger Berman makes no representations regarding the reasonableness or completeness of any such assumptions and inputs. Assumptions, inputs and estimates are periodically revised and subject to change without notice. Estimated returns and volatility should not be used, or relied upon, to make investment decisions.
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|
Asset Class
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Index Source
|
Geometric Est. Return (%)
|
Arithmetic Est. Return (%)
|
OAS
|
OAS D
|
OAD
|
Est. Annual Vol (%)
|
|
Cash (risk-free rate)
|
Bloomberg-Barclays
|
1.53
|
1.53
|
0
|
0
|
0.3
|
0.4
|
|
Investment Grade Credit
|
Bloomberg-Barclays
|
3.76
|
3.92
|
80
|
8.2
|
8.4
|
5.5
|
|
Municipals
|
Bloomberg-Barclays
|
2.95
|
3.04
|
50
|
5.5
|
5.2
|
4.2
|
|
U.S. Government/Agency
|
Bloomberg-Barclays
|
2.74
|
2.81
|
0
|
0
|
7
|
3.9
|
|
Investment Grade Corporates
|
Bloomberg-Barclays
|
3.88
|
4.06
|
84
|
8.5
|
8.7
|
6
|
|
Agency MBS
|
Bloomberg-Barclays
|
3.43
|
3.46
|
27
|
5
|
4.6
|
2.4
|
|
U.S. TIPS
|
Bloomberg-Barclays
|
2.37
|
2.52
|
0
|
0
|
7.9
|
5.5
|
|
High Yield (U.S. BB & B)
|
Bloomberg-Barclays
|
5.28
|
5.64
|
251
|
4.1
|
4.1
|
8.5
|
|
Non-US Fixed Income (Hedged to USD)
|
Bloomberg-Barclays
|
2.9
|
2.95
|
82
|
7.8
|
7.9
|
3
|
|
Non-US Dev Market Fixed Income (Hedged to USD)
|
Bloomberg-Barclays
|
2.47
|
2.51
|
97
|
7.9
|
8.1
|
2.7
|
|
Global Bonds (Hedged to USD)
|
Bloomberg-Barclays
|
2.98
|
3.04
|
65
|
7.4
|
7.5
|
3.5
|
|
ABS/CMBS
|
Bloomberg-Barclays
|
3.97
|
4.28
|
62
|
4.6
|
4.6
|
7.9
|
|
Emerging Market Debt
|
JPM EMBI/CEMBI
|
4.51
|
4.91
|
313
|
6.7
|
6.3
|
8.9
|
|
Bank Loans
|
S&P/LSTA LL 100
|
4.81
|
5.13
|
335
|
3.5
|
0.3
|
8
|
|
Munis 1-3 yrs
|
Bloomberg-Barclays
|
1.74
|
1.74
|
8
|
1.8
|
1.8
|
1.1
|
|
Corporates A above 1-3 yrs
|
Bloomberg-Barclays
|
2.72
|
2.76
|
23
|
1.9
|
1.9
|
2.6
|
|
Preferred Stock
|
ICE BofA
|
4.12
|
4.83
|
146
|
4.7
|
4.7
|
11.8
|
|
U.S. All Cap
|
Russell 3000
|
5.74
|
7
|
-
|
-
|
-
|
15.9
|
|
U.S. Large Cap
|
S&P 500
|
5.79
|
6.97
|
-
|
-
|
-
|
15.4
|
|
Large Cap Growth
|
S&P 500 Growth
|
5.85
|
7.21
|
-
|
-
|
-
|
16.4
|
|
Large Cap Value
|
S&P 500 Value
|
5.58
|
6.74
|
-
|
-
|
-
|
15.2
|
|
U.S. Small Cap
|
Russell 2000
|
5.29
|
7.36
|
-
|
-
|
-
|
20.4
|
|
Small Cap Growth
|
Russell 2000 Growth
|
5.23
|
7.4
|
-
|
-
|
-
|
20.8
|
|
Small Cap Value
|
Russell 2000 Value
|
5.2
|
7.33
|
-
|
-
|
-
|
20.6
|
|
Non-US Equities
|
MSCI ACWI ex US
|
6
|
7.6
|
-
|
-
|
-
|
17.9
|
|
Developed International Equities
|
MSCI EAFE
|
5.98
|
7.51
|
-
|
-
|
-
|
17.5
|
|
Emerging Market Equities
|
MSCI EM
|
5.54
|
7.86
|
-
|
-
|
-
|
21.5
|
|
Global Equities
|
MSCI ACWI
|
5.91
|
7.25
|
-
|
-
|
-
|
16.4
|
|
Public Real Estate
|
NAREIT Equity
|
4.25
|
6.83
|
-
|
-
|
-
|
22.7
|
|
Core Real Estate
|
NCREIF ODCE Index
|
5.52
|
6.62
|
-
|
-
|
-
|
14.8
|
|
Value Add Real Estate
|
Leveraged NPI
|
5.95
|
7.76
|
-
|
-
|
-
|
19
|
|
Commodities
|
Bloomberg
|
4.91
|
6.26
|
-
|
-
|
-
|
16.5
|
|
Hedged Strategies
|
HFRI
|
4.2
|
4.4
|
-
|
-
|
-
|
6.4
|
|
Private Equity
|
Cambridge Associates
|
9.06
|
10.79
|
-
|
-
|
-
|
18.6
|
|
Private Debt
|
Credit Suisse LL
|
7.72
|
8.59
|
534
|
3.5
|
0.3
|
10.1
|
|
Index Definitions
The S&P 500 Index consists of 500 U.S. stocks chosen for market size, liquidity and industry group representation. It is a market value-weighted index (stock price times number of shares outstanding), with each stock’s weight in the Index proportionate to its market value.
The MSCI All Country World Index is a market value-weighted index of more than 2,700 stocks from 23 developed and 24 emerging countries.
The Bloomberg Global Aggregate Bond Index is a broad-base, market capitalization-weighted bond market index representing intermediate term investment grade bonds traded worldwide.
The ICE BofAML Global High Yield Index tracks the performance of of USD, CAD, GBP and EUR denominated below investment grade, but not in default, corporate debt publicly issued in the major domestic or Eurobond markets, and includes issues with a credit rating of BBB or below, as rated by Moody’s and S&P.
The S&P 500 Dividend Aristocrats Index measures the performance of S&P 500 Index companies that have increased dividends every year for the last 25 consecutive years.
The MSCI World Index tracks the performance of large- and mid-cap stocks across 23 developed markets countries.
The MSCI World Index High Dividend Yield Index tracks the performance of large- and mid-cap stocks across 23 developed markets countries. The index is designed to reflect the performance of equities in the MSCI World Index (excluding REITs) with higher dividend income and quality characteristics than average dividend yields that are both sustainable and persistent. The index also applies quality screens and reviews 12-month past performance to omit stocks with potentially deteriorating fundamentals that could force them to cut or reduce dividends.
The ICE BoA Global Sovereign Bond Index measures the market capitalization-weighted performance of public debt of investment-grade sovereign issuers, issued and denominated in their own domestic market and currency.
The ICE BoA Global Corporate Bond Index measures the market capitalization-weighted performance of public debt of investment-grade corporate issuers, issued and denominated in their own domestic market and currency.
The Bloomberg U.S. Long Treasury Total Return Index measures the performance of USD-denominated, fixed-rate, nominal debt issued by the U.S. Treasury with a maturity greater than 10 years, excluding STRIPS. The U.S. Treasury Index is a component of the U.S. Aggregate Index.
The Bloomberg U.S. Long Credit Total Return Index measures the performance of investment grade, USD-denominated, fixed-rate, taxable corporate and government-related bond markets with a maturity greater than 10 years. It is composed of the U.S. Corporate Index and a non-corporate component that includes non-U.S. agencies, sovereigns, supranationals and local authorities, and is a subset of the U.S. Aggregate Index.
The Bloomberg Commodity Index (BCOM) is designed to be a highly liquid and diversified benchmark for commodities investments. The index provides broad-based exposure to commodities as an asset class, since no single commodity or commodity sector dominates the Index. This index is composed of futures contracts on 20 physical commodities traded on U.S. exchanges, with the exception of aluminum, nickel and zinc, which are traded on the London Metal Exchange (LME).
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