Morgan Stanley: Average balanced fund return may halve over next decade

Returns on a typical 60/40 US equity and fixed income portfolio over the next decade may be half those seen over the previous 50 years, according to Morgan Stanley strategists.

The investment bank's cross-asset research team has taken a step back from recent volatility to look at the long-term investment horizon, and its results suggest diversification will be crucial. They predict a conventional 60/40 US portfolio will produce an expected return of 4.8% (2.9% real) over the next decade, compared with a long-run average of 8.6% (or 4.9% in real terms). "Total returns over the next decade will likely be low relative to the experience of the last 30 years. Investor expectations, everywhere, need to be revised lower," the analysts said. The themes of "margin...