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Risky Business: The Challenges Facing Today's Investors

Interest rates are historically low in the U.S. and abroad. Couple this with modest growth, and fund sponsors reluctant to lower return expectations face one of the most difficult investing environments in history.

To find out how difficult, our experts wondered, “What would an investor need to do to achieve a 7.5% return with the least amount of risk possible?” Using Callan’s proprietary forward-looking capital market projections, we found that investors in 2015 needed to take on three times as much risk as they did only 20 years ago.

Return-seeking portfolios are now more complex and expensive than ever. Whereas in 1995 a portfolio made up entirely of fixed income was projected to return 7.5%, by 2015 to achieve comparable returns that fixed income portion was down to just 12%, with private equity and stocks making up around three-quarters of the portfolio.

The results of our research sent a current through the institutional investing community when they were first released in The Wall Street Journal. To get the story behind the story, read this white paper featuring Jay Kloepfer, head of Capital Market and Alternatives Research at Callan, and Julia Moriarty, a consultant in our Capital Markets Research group who conducted the analysis, about the implications of these findings.