For executive recruiters like us, that's a question we'll have to wrestle with as we present candidates to the boards of institutional asset managers.
Two of our investment-management village elders - Bill Gross and Burton Malkiel - say we're staring down the barrel of a low-return decade. They've been around for a while and make good arguments. Maybe we should listen.
Mr. Gross, re-launching his career at Janus at age 72, warns in his June letter that people who have been in the financial markets for many years must recognize that their era has been "magnificent," but it's over.
He points to returns for the Barclay's Aggregate Bond Index since 1976, which grew at an annualized 7.47 percent. For 40 years, conservative bond-investors reaped ample and fairly stable returns.
Then he points to stock returns over the same 40 years, which were far more volatile but paid an average premium of about 3 percent over bonds for bearing that risk.
So, a boring stock/bond blend delivered a nominal, annualized return of around 9.3 percent in those four golden decades.
But, according to Mr. Gross, this period of glorious returns was "a grey if not black swan event that cannot be repeated."
He clinches his argument by noting that, in the kind of "laddered" constant-maturity bond portfolios most investors use, it takes a long time to raise fixed-income returns when you're starting with low yields. This is a feature of bond-investing that isn't intuitively obvious to most of us, but bond guys understand.
With the Barclay's Agg now yielding just 2.17 percent it will "almost assuredly return between 1.5 and 2.9 percent over the next ten years, even if yields double (or drop to zero) by the end of that span.
Give stocks their traditional 3 percent premium and that implies a 4.5 to 5.9 percent equity return in the coming decade. Suddenly a balanced portfolio going forward produces less than 5 percent nominal.
That's the view of a fixed-income elder. But we know forecasting bond returns is a lot easier than forecasting stock returns. How about the view of an equities elder?
Coincidentally, Burton Malkiel, wrote a column recently in which he considers three standard ways of forecasting stock returns, all of which forecast a similar low-return future.
It's here: https://blog.wealthfront.com/us-stock-long-term-returns/
(Mr. Malkiel wrote one of the most influential investing books, ever: 1973's A Random Walk Down Wall Street, introducing the efficient-market hypothesis to the general public. He's a distinguished academic with a Princeton PhD who has always kept one foot in the business world. At age 82 he now serves as chief investment officer for robo-advisor startup Wealthfront.)