Credit Suisse is not only experieced in burning HNWIs money but also in providing quality research.

Seen at the CS Global Investment Returns Yearbook 2009 (published in Feb2009)

Their research cleans up some moldy sales pitch phrases. When I was socialized in Private Banking, clients were told to expect from equity some 10-12% annual return. CS´s analysts falsify this assumption. Chart below outlines that +/- 10% was correct in the roaring 90s.

In the long run 1900-2008, we are talking about real equity returns of +/- 5%. This insight should impact portfolio allocation models. Erase once and for all BUY & HOLD strategies in listed equities. It does not work.

But listed equity performance expectations were not the only ones that got grilled. With bonds 2,2% p.a. and Bills with 1.0% p.a. in the last 108 years you can run only capital preservation strategies.

Possible solution for higher returns: Private equity. As one of the few, the private equity industry reached new highs in unrealized portfolio value (2007: USD 1176 billion | 2008: USD 1478 billion) and dry powder (2007: USD 984,5 billion | 2008: USD 1014,8 billion) in 2008. This investment type has all inflation shield advantages of listed equity and on top (in best case) a longer investment horizon that helps in diving through touch times. Hence, new funds run by experiences managers with strategies that rely on reduced leverage, professional liquidity management and a transparent investment structure can collect attractive equity deals on the street.