In its 2026 Long-Term Capital Market Assumptions (LTCMAs) released this week, JPMAM’s forecast annual return for an AUD 60/40 stock-bond portfolio over the next 10 to 15 years sits at 5.9 per cent.
Despite a year of strong equity gains, the firm maintained that asset return projections remain solid, even with labour constraints impacting the long-term outlook.
It also expressed optimism about near-term profit growth and longer-term productivity gains from the adoption of artificial intelligence (AI).
Meanwhile, the firm noted that the rise in economic nationalism could be a silver lining amid the effects of tariffs by prompting some countries to increase domestic investment.
However, JPMAM predicted that for investors willing to embrace a 60/40+ portfolio – adding a 30 per cent allocation to alternative assets – the projected return jumps to 6.5 per cent.
As JPMAM’s chief executive officer for Australia and New Zealand, Andrew Creber explained, building resilience in today’s volatile environment means going beyond the traditional.
“Investors need to think outside the box, embracing alternatives and real assets to manage risk and unlock new sources of return,” Creber said.
Recent months have seen some argue that the traditional portfolio split is no longer suited to today’s volatile markets, raising questions about defensive asset allocations and the appropriate mix of alternatives.
Speaking at a media briefing on the LTCMAs on 20 November, JPMAM portfolio manager Leon Eidelman explained that determining the ideal allocation to alternatives is challenging, as it must be tailored to each investor’s liquidity requirements and risk tolerance.
However, Eidelman said that for unconstrained investors, research indicates a 70/30 split between public and private risk assets provides a “pretty good holistic outcome”.
He pointed to US endowment funds having an almost 50/50 split between public and private.
“That’s maybe in our thinking a little more extreme, but that gets you to the idea of what a more unconstrained, long-term, big institution, indifferent to illiquidity risk, can look like,” he told attendees.
At the same time, Eidelman conceded that due to their ties with the US administration and liquidity needs, they have begun reducing their alternative portfolios, especially in private equity.
Also at the briefing, JPMAM market strategist Kerry Craig added that the “perfect split” for alternative exposure depends largely on its intended role – whether for diversification, inflation protection, or income generation.
He noted that the firm’s 30 per cent alternative asset allocation is “deliberately very diversified”, spanning commodities, private equity, real estate, hedge funds and private credit. It is also modelled increasing from 10 to 30 per cent allocations to demonstrate how even investors with no current allocation could enhance their portfolios incrementally.
At the same time, while alternatives were a major focus for the firm’s LTCMAs for the coming year, it also isn’t the first time the firm’s annual outlook has highlighted the value of boosting exposure to these asset classes.
JPMAM’s 2024 LTCMA forecast suggested that a 25 per cent allocation to these asset classes could lift 60/40 portfolio returns by 60 basis points for a USD portfolio.
