As we compiled the 2018 edition of our Long-Term Capital Market Assumptions, the world economy has been enjoying its best period of synchronized growth in more than a decade. Policymakers have coaxed an unusually long, if shallow, expansion out of the near-death experience of the global financial crisis, and despite the long-run drag of global aging, technological innovation seems to be at a positive inflection point – giving a tantalizing glimpse of what might trigger a long overdue boost to productivity.

Our long-term outlook is for gradually rising rates, constrained equity market returns and a declining US dollar. For UK pension schemes, especially those in negative cash flow, building portfolio resilience and managing liquidity will be critical in this late stage of the economic cycle.

One of the ironies of the post-financial crisis period is that we continue to feel so impoverished despite having experienced one of the longest bull runs in capital market history. Pension funds are in the crosshairs of this paradox. Large cash contributions have earned strong returns, yet funding levels have declined as the cost of securing the promises made to members has increased beyond all expectation.

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