FOR INSTITUTIONAL / WHOLESALE / PROFESSIONAL CLIENTS AND QUALIFIED INVESTORS ONLY – NOT FOR RETAIL USE OR DISTRIBUTION
PORTFOLIO INSIGHTS
2020 Long-Term
Capital Market Assumptions
LTCMA Mark-to-Market: COVID-19 – New cycle, new starting point
IN BRIEF
• Prompted by the profound shock to the economy
and markets of COVID-19, we are for the very
first time providing an off-cycle mark-to-market
of our Long-Term Capital Market Assumptions
return projections.
• We have not altered the assumptions themselves
but, rather, focused on how the sharp swings in
asset prices will affect the long-term outlook for
returns and, by extension, portfolio construction.
Time-tested projections
to build stronger portfolios
• While the full implications of today’s policy actions
are still vague, the effect of massive fiscal and
monetary stimulus, and the associated jump in
government borrowing, could eventually lead to
steeper curves, a shift in equity market leadership
and a tilt in how economic rewards are shared in
the years to come.
• We finish with personal recollections and insights
gained through previous crises from a dozen of
our most senior portfolio managers, strategists
and research analysts. While no two bear markets
are the same, the lessons of history can offer a
helpful perspective.
LTCMA Mark-to-Market:
COVID-19 – New cycle, new starting point
John Bilton, CFA, Head of Global Multi-Asset Strategy, Multi-Asset Solutions

LTCMA COVID-19 UPDATE: OVERVIEW

For the first time in nearly a quarter-century of producing our We have also considered the portfolio context and the possible
Long-Term Capital Market Assumptions (LTCMAs), we have elected impact that recent policy actions might have on the economic
to provide an update outside of our normal annual publication and investing landscape in years to come. Finally, we have asked
cycle to the return expectations for a range of asset classes. To a dozen of our most senior and experienced portfolio managers,
be clear, this is not a complete reassessment of our underlying strategists and research analysts to share some of their personal
assumptions, and we look forward to publishing our 25th annual experiences from past crises, ranging from the crash of ’87 to the
edition in November. However, the severity of market moves in eurozone sovereign debt crisis. While no two shocks or recessions
early 2020, as well as our memories and experiences of prior are the same, we hope that this montage will provide some
crises and recessions, motivated us to mark our assumptions to useful perspective as we navigate the current crisis.
market.1
The economic optimism that had begun to emerge in late 2019
Global government bond returns are down slightly since our
as the ravages of the U.S.-China trade spat receded, now seems
last publication, while global equity returns are higher
little more than a distant memory. But if we cast our minds back,
EXHIBIT 1: CHANGE OF EXPECTED RETURNS FROM 9/30/19 TO 3/31/20
the world economy was in the latter stages of a record-breaking FOR SELECTED ASSETS
expansion phase and a remarkable bull market. Nevertheless,
a combination of easy policy and a lack of corporate exuberance Fixed income assets (%, local expected return)
provided the ingredients for the already aged cycle to extend Asset Sep-30 Mar-31 Change
further. From a long-term perspective, forward-looking asset U.S. cash 1.9% 1.6% -0.3%
returns had been pushed inexorably downward as valuations had U.S. short Treasuries 2.7% 2.3% -0.4%
risen and – as a result of exceptionally easy monetary policy – U.S. intermediate 2.7% 2.2% -0.5%
interest rates had steadily fallen. Treasuries
U.S. long Treasuries 1.6% 0.3% -1.3%
Few, if any, outside of the medical and scientific communities
might have predicted what happened next. Under the shadow of Euro cash 0.6% 0.6% 0.0%
a burgeoning medical crisis, governments globally faced the Euro government bonds 0.7% 1.0% 0.3%
trade-off between public health and economic health. World government 2.5% 2.4% -0.1%
Unsurprisingly, public health prevailed, but the price was a bonds*
sudden stop to the last economic cycle and a rewrite of the U.S. aggregate bonds 3.1% 2.8% -0.3%
economic policy textbook as we knew it. U.S. investment grade 3.4% 3.8% 0.4%
corporate bonds
In this update to our return expectations (Exhibit 1), we focus U.S. high yield bonds 5.2% 6.9% 1.7%
primarily on taking into account the wild market moves that
occurred over March 2020 as global equities swung from bull
Equities and alternatives assets (%, local expected return)
market to bear market territory in record time. Clearly, however,
Asset Sep-30 Mar-31 Change
the market volatility has continued, as the sharp bounce in stock
prices through April suggests. As the precise mark-to-market AC world equity* 6.5% 8.1% 1.6%
remains a moving target, we have also sought to provide some U.S. large cap 5.6% 7.2% 1.6%
insight into how sensitive the long-term return forecasts might be Euro area large cap 5.8% 8.2% 2.4%
to the entry price. Japanese equity 5.5% 6.5% 1.0%
Emerging market 9.2% 10.5% 1.3%
equity*
1
In this exercise, we have simply updated the starting price of assets from that on
September 30, 2019, to the prevailing price on March 31, 2020. This captures the Private equity 8.8% 9.8% 1.0%
sharp market moves of March 2020 but at this time does not update any underlying U.S. core real estate 5.8% 6.6% 0.8%
assumptions – including equilibrium yields and normalization paths for rates and
equilibrium valuations and margins for stocks. These will be updated and in the Source: LTCMAs, J.P.Morgan Asset Management Multi-Asset Solutions; data as of
next full edition of LTCMAs due in November 2020. The full details of the current April 2020.
assumptions are available in the 2020 Long-Term Capital Market Assumptions. Note: Short Treasuries - 1 to 5 Yrs Maturity; Intermediate Treasuries - 1 to 10 Yrs;
The mark-to-market exercise has been conducted for expected returns in Long Treasuries - Over 20 Yrs.
USD-, EUR- and GBP-denominated assets; it does not extend to updating covariance * Composite returns are listed in USD terms.
assumptions, which already include an adjustment for periods of high volatility.

2 LTC MA MA R K - T O - MARK ET: CO VID- 19 – NEW CYCL E, NEW ST ART I N G POI N T


Change in expected returns for selected assets
In providing this mark-to-market of our return expectations,
we should first note that we have not altered any of the
equilibrium economic assumptions or normalization pathways
that we published in November 2019. Our economic framework
is based on a supply-side model that provides an estimate of
trend growth for countries and regions. While COVID-19 is clearly
having a deep impact on economic activity today, we see few
first-order impacts on the long-term potential growth of the
economy. Simply put, we don’t see the coronavirus-linked
recession as significantly changing potential growth in the long
term. Certainly, some of the policy measures being rolled out
today could have an impact at the margin, and we will assess
these in our 25th edition of the LTCMAs, due in November, but for
the purposes of this exercise we are keeping our ultimate
equilibrium growth, inflation and policy rates unchanged.
As stock markets slumped in March, sovereign bond yields fell
and credit spreads widened, translating to a drop in expected
returns of 30 basis points (bps) for world government bonds2 and
a jump of 170bps for U.S. high yield bonds when we mark-to-
market off of March 31 asset prices. But as we delve deeper, we
find some interesting nuances. The decline in government bond
returns is profound for U.S. Treasuries – with expected returns for
U.S. 10-year notes falling 70bps and for the long Treasuries index
falling 130bps. By contrast, expected returns for euro
government bonds are actually 30bps better, reflecting the
extraordinarily low yields already in place well before the start of
the coronavirus crisis (Exhibit 2).
Across geographies, the returns on longer-duration bonds are
worse than those for cash
EXHIBIT 2: KEY BOND EXPECTED RETURNS (USD, EUR, JPY, GBP) AND
FORECAST INFLATION
Cash return Bond index return Long end return
Bond return comparison LTCMA update 2020, local expected return, %
3%
2%
1%
0%
-1%
-2%
USD GBP EUR
Source: LTCMAs, J.P.Morgan Asset Management Multi-Asset Solutions; data as of
April 2020.
Note: USD refers to the US Government Bond Index Return.
2
Global government bonds, hedged in USD.
LT C M A M A R K-T O - M A R K E T: C O V I D - 1 9 – N E W C Y C L E , N E W S TA R T I N G P O I N T
Key expected bond returns and forecast inflation
Expected returns in credit have improved more or less in inverse
proportion to credit quality. This reflects both the level of spread
widening that took place and the shorter duration of speculative
grade bonds compared with investment grade. The March 31
mark-to-market doesn’t account for the Fed’s recent decision to
buy corporate bonds, including some BB rated bonds, which has
compressed spreads quickly in April. Equally, however, it does not
reflect either the recent oil price volatility or the extended
leverage in some sectors – both of which may act to increase
credit losses in the near term. On balance, expected returns in
credit have risen, and in some cases they approach those
available in equity markets. Meanwhile, government bond returns
have fallen and in most instances are now negative in real terms.
Although duration is set to remain in demand while the world is
in recession, today’s buyers of bonds really shouldn’t be looking
to hang onto them for the long haul.
Expected returns for stocks have risen across the board by between
100bps and 250bps. This may seem counterintuitive given recent
commentary on the risks to earnings, dividends and buybacks. But
even though short-term fluctuations in earnings are important,
within our LTCMA equity framework we focus on trend earnings,
which are linked to long-term potential growth. At the same time, we
would not expect restrictions on cash return to persist for long after
the crisis and recession start to clear. Although in certain regions
and sectors there is near-term pressure to reduce payouts, we don’t
expect that to become a lasting theme since the nature of this shock
was not a result of corporate misbehavior.
At this stage we don’t expect the current recession to significantly
affect potential growth in the long run largely because the losses
have been socialized – taken on to the governments’ balance sheet.
The medium-term implications for household and corporate
financial health should be limited and as a result trend earnings
Inflation rate and margins remain largely stable in our outlook. Thus the major
change to our forecasts is linked to valuations, and therefore to
prevailing prices.
U.S. large cap stocks were long the most expensive of equities,
yet throughout the last expansion they set the pace globally due
to the high quality of the market and the tilt toward technology.
As of March 31, expected returns for U.S. large caps had risen
from 5.60% to 7.20%, reflecting the sharp drop in the index over
March. While this puts expected returns from U.S. equities much
closer to what we consider their fair “secular” level,3 expected
returns for other regions now stand well ahead of the U.S. In
local currency terms, returns on euro area equities increase
JPY
240bps to 8.20%, emerging market (EM) equities increase 90bps
to 9.60%, and Japanese equities increase 100bps to 6.50%. Given
the current overvaluation of the U.S. dollar, the currency effect
further amplifies the expected return premium for non-U.S.
markets. But when this is put into risk-adjusted terms, the non-
U.S. return premium is lessened (Exhibit 3).
3
Secular return expectations were referenced in both the 2019 and 2020 LTCMA notes
and refer to the anticipated level of returns from an asset at equilibrium; in the case
of equities, this eliminates the effect of valuation and margins from the estimate.
J.P. MORGAN ASSE T MAN AGE ME N T 3
LT C M A M A R K-T O - M A R K E T: C O V I D - 1 9 – N E W C Y C L E , N E W S TA R T I N G P O I N T

Equity returns have moved higher, driven by better starting valuations. This has implications for Sharpe ratios as well.
EXHIBIT 3: SHARPE RATIOS FOR KEY EQUITY CLASSES, MID-YEAR UPDATE VS 2020 LTCMAS
Mid-year update 2020 Sharpe ratio LTCMA 2020 Sharpe ratio Mid-year update 2020 expected return, USD LTCMA expected return, USD

0.42 10.5%
Emerging market equity Emerging market equity
0.35 9.2%

0.45 8.2%
Japanese equity Japanese equity
0.36 7.2%

0.39 10.0%
Euro area large cap Euro area large cap
0.27 7.7%

0.39 7.2%
U.S. large cap U.S. large cap
0.26 5.6%

0.00 0.10 0.20 0.30 0.40 0.50 0.0% 2.0% 4.0% 6.0% 8.0% 10.0% 12.0%

Source: LTCMAs, J.P.Morgan Asset Management Multi-Asset Solutions; data as of Source: LTCMAs, J.P.Morgan Asset Management Multi-Asset Solutions; data as of
April 2020. April 2020.
Sharpe Ratio = (Compound Return - Cash Return) / Volatility.

A rise in expected returns for private equity and
real assets
For financial alternatives – notably private equity and hedge
funds – the most important driver of returns is the expected
return on public asset markets. Higher expected returns across
public equity markets translate to an increase in expected
returns for cap-weighted private equity of 100bps to 9.80%.
Our alpha projections continue to be relatively aggressive for
both hedge funds and private equity and recent market volatility
actually reinforces our conviction that there is a good medium-
term outlook for alpha generation. Notably, dry powder on
private equity balance sheets can be deployed now at lower entry
multiples, broadly offsetting higher debt funding costs, and
higher volatility plus greater dispersion augurs well for hedge
fund alpha trends.
Within commodities the plunge in energy prices raises the
expected return outlook despite there being no change to our
underlying trend growth assumptions. For gold, meanwhile, we
have left our return expectations unchanged despite the strong
rally in the metal. Over the long run we expect our projection of
a weaker dollar and an eventual rebound in inflation to support
expected returns for gold.
Expected returns for private real assets have also risen, in our
view, but we caveat this statement knowing that the actual
marks-to-market are typically possible only six to eight weeks
after quarter end. As a result, our estimates based on a
theoretical March 31 mark-to-market necessarily have a wide
confidence band. We think as a base case that capital values for
real assets may be marked down as much as 10% as a result of
the prevailing crisis. However, unlike the global financial crisis,
when inflated asset values drove impairments, we see much of
the markdown arising from the recession-induced near-term hit
to cash flows. In the fullness of time, we expect these cash flows
to rebound – first in the more stable core sectors, such as
logistics, and rather later in more cyclical sectors like hotels.
This translates to an increase in expected returns of between
70bps and 100bps for real estate, and around 70bps for
infrastructure, which is generally less cyclical and has greater
cash flow protection; REIT returns increase meaningfully due to
higher leverage and valuation adjustments.
With expected returns from bonds now impaired due to low
starting yields, real assets with reliable noncyclical cash flows are
likely to receive renewed attention from asset allocators. As
investors move on from the liquidity fears that led to market
turmoil in March, it is worth noting that it was real asset
innovators that emerged as winners in the post-2008 period.
Those assets exposed to technology and to renewables fared
especially well, and while we think these themes remain strongly
in play for the next cycle, there is an added dimension of fiscal
stimulus. Sectors that benefit from this fiscal largesse also stand
to be among the winners in the next cycle.
What secular themes might characterize
the next cycle?
Across all asset classes, we make only one alteration in this
mark-to-market exercise – the starting price. Given that price
action, particularly in equity and credit markets, remains highly
volatile, we would note that the mark-to-market based on prices
from March 31 serves mainly as a guide. Over the coming
months, the likely character of the next cycle and the
implications of recent policy innovations will become clearer. But
one point from this exercise is very clear and is borne out by
examining the expected returns based on different starting asset
prices (Exhibit 4): The more prices fall in the short run, the
greater the boost to long-term expected returns. Put another
way, the more bearish one is today, the more bullish one should
be about long-run returns.

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 LT C M A M A R K-T O - M A R K E T: C O V I D - 1 9 – N E W C Y C L E , N E W S TA R T I N G P O I N T

Entry points are an important driver of long-term returns, especially when markets are as volatile as they have been recently
EXHIBIT 4: LONG-TERM RETURN SENSITIVITY TO ENTRY POINT FOR U.S. EQUITY AND U.S. 10-YEAR NOTE

Local expected return S&P 500 U.S. 10-year Treasury

Starting point Starting level Implied LTCMA return Starting yield Implied LTCMA return
September 30, 2019 2976.74 5.6% 1.66 2.4%
Market high of last 6 months 3386.15 4.5% 0.54 1.6%
Market low of last 6 months 2237.40 8.5% 1.94 2.6%
March 31, 2020 2584.59 7.2% 0.67 1.7%
April 17, 2020 2874.56 6.1% 0.64 1.6%
Source: LTCMAs, J.P.Morgan Asset Management Multi-Asset Solutions; data as of April 2020.
Note: Implied LTCMA Returns are calculated to the nearest 0.1%.

On the face of it, this may seem an odd statement to make, but
it reflects an important observation, which is that we should not
confuse cyclical and secular drivers of returns. As we learned in
the global financial crisis, treating even profound cyclical issues –
banking stability, for example – as a secular drag on returns can
lead to an underestimate of long-term returns. Policymakers
could, and did, find ways to help asset market returns recover.
At the core of our LTCMA framework are our underlying economic
building blocks of population, productivity and policy. And while
we will have to account for some policy shifts in the longer run –
particularly how successfully fiscal stimulus is deployed, and how
it is ultimately paid for – the other building blocks of our
framework are quite stable. As a result, while starting points
matter greatly to our return outlook, we urge readers not to
mistake today’s cyclical issues for secular headwinds.
Moving beyond the immediate impact of the price volatility on our
return expectations, there are some secular themes that we
believe might come to characterize the next cycle. First, we
believe that fiscal stimulus will be a game changer. In our 2020
edition of the LTCMAs, we wrote about the failure of monetary
policy, noting that in the next recession fiscal stimulus would also
be required. Our main surprise is that this has happened so
quickly and so decisively. While the current recession will naturally
see concurrent disinflationary pressure and low bond yields,
we believe more expansionary fiscal policy will be a permanent
feature as we emerge from the recession despite the fact that
governments will have accumulated significant amounts of debt.
There is simply no appetite for new wave of austerity. As a result,
we expect both monetary and fiscal policy to remain expansionary
into the recovery (a stark difference from the post-global financial
crisis period). This in turn should lead eventually to steeper curves
and reflationary pressure in the intermediate term.
This is likely to be highly supportive for equities relative to
bonds over the full extent of our 10- to 15-year forecast horizon –
something hinted at if we look at the extreme levels that equity
risk premia have now reached in all major markets (Exhibit 5).
Nevertheless, steeper curves and more scope for a reflationary
cycle in the next expansion could prompt a shift in equity
leadership. Value stocks never quite had their moment over the
last 10 years as low yields and a very low inflation backdrop
favored longer-duration equity and growth as a style. From a
regional perspective, this played to the strengths of the U.S.
market – and with the surge in technology it meant that the
2010s really was “the American decade” for stock market returns.
The technology theme is here to stay, but with scope for steeper
curves, reflation – and the possibility of fiscal stimulus sharply
boosting investment in renewables and sustainability – the 2020s
might see other regions start to play catch-up.

The recent decline in bond yields has pushed equity risk premia to near historical highs
EXHIBIT 5: EQUITY RISK PREMIA FOR KEY EQUITY MARKETS
GFC U.S. Europe Japan EM

10%

8%

6%

4%

2%

0%

-2%
1984 1989 1994 1999 2004 2009 2014 2019

Source: Datastream, LTCMAs, J.P.Morgan Asset Management Multi-Asset Solutions; data as of April 2020.

J.P. MORGAN ASSE T MAN AGE ME N T 5

 LT C M A M A R K-T O - M A R K E T: C O V I D - 1 9 – N E W C Y C L E , N E W S TA R T I N G P O I N T

The start of a new cycle

The past few weeks will go down in history as one of the sharpest We believe that the economy will, in time, bounce back strongly
upheavals of economic policy and asset markets ever witnessed. from this recession. And while we do not yet fully know what
It will also come to be seen as the end of the longest economic will define the next cycle, we remain convinced that investment
expansion on record and – critically – the start of a new cycle. opportunities will present themselves as the new economic
That cycle will have its own unique characteristics, and we expect themes and priorities become clear.
to be writing on themes such as technology, sustainability, share
of economic returns between capital and labor, reflation and
style rotation as the new cycle starts to take shape. Still, some
of the issues we can see today are immutable: Stock returns are
profoundly above bond returns; the simple 60/40 stock-bond
allocation is changing, with cash flows from alternatives and real
assets increasingly a substitute for coupon income; and diversi-
fication remains of paramount importance (Exhibits 6A and 6B).

Since our last update, the stock-bond frontier has steepened markedly
EXHIBIT 6A: USD STOCK-BOND FRONTIERS
2020 Mid-year update
2020 stock-bond frontier
2008 stock-bond frontier
12
10 EM debt
(hard currency)
8 U.S. HY
Compound return (%)
EXHIBIT 6B: EUR STOCK-BOND FRONTIER
Updated 60/40 portfolio 2020 Mid-year update Updated 60/40 portfolio
60/40 portfolio (2020) 2020 stock-bond frontier 60/40 portfolio (2020)
60/40 portfolio (2008) 2008 stock-bond frontier 60/40 portfolio (2008)
9
Euro area large cap
EM equity 8 U.S. HY (hedged)
EM debt (hard currency, hedged) Private equity
Global infrastructure equity Private equity
7
AC World equity
AC World equity 6 U.S. large cap (hedged)
Compound return (%)

European ex-UK core RE

U.S. large cap
5 Div hedge funds (hedged)
6
U.S. core RE 4
Div. hedge funds
4 3
Global infrastructure debt

U.S. agg bonds 2 Euro agg bonds

2 U.S. intermediate Treasuries Euro Euro gov’t I-L bonds
U.S. cash 1 cash Euro gov’t bonds
World gov’t bonds (hedged)
0 0
0 5 10 15 20 25 0 2 4 6 8 10 12 14 16 18 20
Volatility Volatility

Source: LTCMAs, J.P.Morgan Asset Management Multi-Asset Solutions; data as of April 2020.

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 P R E V I O U S F I N A N C I A L C R I S E S : R E C O L L E C T I O N S A N D I N S I G H T S F R O M S E N I O R I N V E S T O R S A N D S T R AT E G I S T S

Previous financial crises:

Recollections and insights
from senior investors and strategists

While no two crises are identical, the lessons of history can provide a
helpful framework for investors trying to navigate the coronavirus shock
to the economy and markets. Drawing on their experiences of past crises,
from the 1987 stock market crash to the sovereign debt crisis, our most
senior portfolio managers, strategists and research analysts share their
personal recollections and lessons learned. It’s a varied montage that we
hope will resonate.

J.P. MORGAN ASSE T MAN AGE ME N T 7

P R E V I O U S F I N A N C I A L C R I S E S : R E C O L L E C T I O N S A N D I N S I G H T S F R O M S E N I O R I N V E S T O R S A N D S T R AT E G I S T S

Lessons in risk-taking from the summer of 1998

“After 42 years in the business, I sometimes feel like I’ve seen everything.
But I’ve never seen anything like the current crisis.”

Jeffrey Geller, CFA
Chief Investment
Officer,
Multi-Asset Solutions
By the summer of 1998, I had been running hedging and arbitrage strategies for institutional clients for almost 20
years. I thought that the decisions I had made during the 1987 crash would be the defining moment of my career.
Little did I know what lay ahead.
That summer, cracks began to appear in Russian debt markets and other emerging markets. Options going out six
months to a year, which I would typically be buying for hedging purposes, were trading incredibly cheap in terms of
the forecast for risk. I snapped them up for clients that wanted to hedge. Meanwhile, in the arbitrage strategies that
I ran, spreads were exceptionally narrow. On a risk-reward basis, these relationships made no sense, and I believed
they were unsustainable. I slashed arbitrage risk across portfolios.

Then came the September demise of hedge fund Long-Term Capital Management, whose portfolio positioning
(including ungodly amounts of leverage) had been driving markets. The fund’s unraveling created an extraordinary
opportunity. I sold longer-dated volatility on equity indices for three times what I had paid earlier that summer, and
at a premium even to levels reached around the 1987 crash. In addition, the internet craze was in full swing,
enabling a successful arbitrage play: buying the calls on an internet stock and shorting the stock against it.

Looking back, the decisions I made in 1998 seem straightforward, but at the time they felt scary. Rather than a
defining moment, they could have spelled the end of my career if my positioning had gone the wrong way. And that
lesson has stayed with me.

After 42 years in the business, I sometimes feel like I’ve seen everything. But I’ve never seen anything like the
current crisis, unleashed by a global pandemic. No one knows how long or deep the downturn will be. Given that
uncertainty, it’s a time for balanced risk-taking.

The 1987 crash underscores the value of long-term investing

“The 1987 crash was without an obvious fundamental cause or significant economic consequence.”

In the fall of 1987, I was teaching an economics course at Michigan State University. On Monday, October 19, an
excited student ran into my office to tell me that the Dow Jones Industrial Average had fallen by 508 points, which
at the time was 22.6%. I explained to him why that couldn’t have happened – but of course it had, in the single
biggest daily percentage decline in U.S. history.
Dr. David Kelly, In retrospect, the 1987 crash taught us a great deal.
CFA
First, it was a crash without an obvious fundamental cause. The stock market had been rising strongly for almost
Chief Global
five years without a significant correction, and valuations were above average levels. However, the economy was
Strategist, Head
growing steadily and geopolitical tensions were not particularly abnormal. Some have pointed to a falling dollar as
of Global Market
a cause for the crash, but it is hard to argue that changes in exchange rates could justify wiping out over 20% of the
Insights Strategy
value of U.S. companies.
Second, it was a crash without significant economic consequence. Consumer spending held up well in the months after
the 1987 crash, and the economy continued to grow steadily until the mild recession of 1990.
Third, the crash serves as the single biggest reminder that stock market returns are not normally distributed. The
standard deviation of daily returns in the year before the crash was just 25 index points. As has often been the case
before and since, the decline in the market was exacerbated by trades designed to de-risk portfolios by dumping
stocks or stock index futures as the market declined.
Finally, the crash underscores the value of long-term investing. If my student, instead of racing into my office that
afternoon, had run off to a stockbroker, invested his money and achieved the average return of the S&P 500 since
then, he would have made 10.9% annually, including dividends. However, if on that afternoon he had arrived in
tears to tell me that he had put his savings into the market the Friday before the Black Monday crash, he would still
have made an annual 10.0% over the subsequent years.

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 P R E V I O U S F I N A N C I A L C R I S E S : R E C O L L E C T I O N S A N D I N S I G H T S F R O M S E N I O R I N V E S T O R S A N D S T R AT E G I S T S

Lessons from the 2000 tech boom/bust

“Stocks are worth their future cash flows – there is no substitute.”

I loved being a technology investor in the late 1990s – it was such an exciting time. The internet, just emerging,
unleashed fantastic possibilities. You could buy things online! Work from home! Connect with your friends! The “old”
analog economy was ceding ground to the “new” digital economy. Just putting “dot-com” in a corporate name made
the valuation soar, occasionally past 100 times earnings (if there were no earnings, often “eyeballs” on a website
Lee Spelman, CFA sufficed).
Head of U.S. Equity
Tech stocks doubled and then doubled again. It seemed everyone from taxi drivers to doctors wanted to be a day
trader. Most crises are rooted in fear; this one was driven by greed.

The market peaked in March of 2000. It wasn’t a big bang, and no single event caused the unraveling. High profile
bankruptcies and 9/11 were contributing factors, but overall it was a slow, steady erosion, ultimately culminating in
a peak-to-trough drop of 78% for the tech-heavy Nasdaq. It took 15 years for the index to reach its prior peak.

Some lessons from that era have stayed with me:

• It’s easy to get caught up in the hype: We all want to believe in innovation and growth.
• Change happens more slowly than you expect, but then it flies. The internet did change everything, but it took
longer than people forecast. We needed the convergence of mobility, big data and the cloud for the change to
fully accelerate.
• Stocks are worth their future cash flows – there is no substitute.
• Stocks can go down much further than you ever thought possible, even after they have already plummeted.
• You can’t set it and forget it. Most of the tech leaders of the dot-com era never recovered. New leaders emerged.

From all these lessons, I draw one conclusion. Active and engaged stock selection is key to long-term investing success.

Lessons in leverage from 2000-02 credit markets

“We may be living with a lower quality investment universe for quite some time to come.”

When volatility started to pick up in U.S. credit markets in 2000, I had recently started a new job managing global
credit portfolios at an asset management firm. Markets were focused on increased corporate leverage and the specter
of rating downgrades. When I look back on the 2000-02 period, I see clear similarities to the current environment –
“leverage” and “fallen angels” are hardly unfamiliar concepts these days — but also important differences.
Lisa Coleman
Several factors were specific to the earlier era. First were the effects of the 1990s deregulation of the telecom
Head of Global industry (leading to significant overcapacity) and the California electricity market. Elements of this deregulation
Investment Grade helped set the stage for instances of corporate malfeasance, which resulted in the collapse of Enron and Worldcom.
Corporate Credit (I remember one stressful weekend following our decision to sell Enron based on our mounting concerns about the
company’s operations. We decided to hold off on selling the euro-denominated debt, expecting a higher price on
Monday. Indeed, we did sell at close to par, and weeks before the company collapsed.) Another defining event of
that era was the shock of 9/11. In the end, the 2001-02 period saw an unprecedented number of fallen angels as the
economy slipped into recession.

U.S. corporations entered that recession with stretched balance sheets, but after leverage peaked in 2002 it then
came down steadily. And here’s where I see a key divergence from the current cycle. Companies entered the 2020
recession with higher leverage than at the 2002 peak, and they will likely emerge into the next cycle with even
more debt on their balance sheets.

We do not expect a V-shaped recovery, and in a less than robust economic environment companies may remain
considerably more leveraged than in past cycles. At the same time, though, the Federal Reserve will, for the first time,
buy bonds of certain fallen angels (companies with investment grade ratings as of March 22), thus providing a market
backstop. On balance, we may be living with a lower quality investment universe for quite some time to come.

J.P. MORGAN ASSE T MAN AGE ME N T 9

P R E V I O U S F I N A N C I A L C R I S E S : R E C O L L E C T I O N S A N D I N S I G H T S F R O M S E N I O R I N V E S T O R S A N D S T R AT E G I S T S
2000–02: The pain of bear market rallies
Katy Thorneycroft
Portfolio Manager,
Multi-Asset Solutions
1987 crash: Bank training grad sees first black swan event
Patrik Jakobson
Portfolio Manager,
Multi-Asset Solutions
1 0 LTC MA MA R K - T O - MARK ET: CO VID- 19 – NEW CYCL E, NEW ST ART I N G POI N T
“A bear market rally can make you a hero or … something else altogether.”
In 1999, as the tech boom roared, I was fresh out of university, a newly minted portfolio manager on the European
behavioral finance equities team. Having studied the various principles of valuation, I was interested to see that a
discounted cash flow could easily justify any share price as long as your forecasts were optimistic enough and your
terminal value was suitably extravagant.
As the cycle neared its peak, I was concentrating on mid and small cap companies. Looking back, I see that I was
very lucky to be working for an experienced portfolio manager who had seen several bear markets in his time. He
kept me focused on corporate cash flows and balance sheets.
Two lessons from the 2000-02 bear market have stayed with me. First, bear market rallies can be brutal. In 2001, I
recall, the FTSE fell by 15% overall, but there was a 20% rally in the final months of the year. We won’t know for
some time whether the recent rally this year is in fact a bear market episode. Depending on how you are positioned,
a bear market rally can make you a hero or … something else altogether. In my early years in the business, I
learned that it helps to keep true to your investment framework while remaining humble enough to shift course
when the evidence changes.
Second, I learned that investors may overlook valuations for a period of time, but it’s rarely a permanent condition.
Value stocks had been somewhat out of fashion in the later stages of the late 1990s bull market. But once the bear
market ended in 2003 and the stage was set for a reacceleration of growth, investors had the luxury of being more
price sensitive. Again, only time will tell, but if the next cycle delivers higher levels of nominal growth, it could
provide a tailwind for long-beleaguered value stocks.
“By definition, black swan events are low probability occurrences.
But over the past 30-plus years, they seem to arrive with some regularity.”
I was a few weeks out of the training program at J.P. Morgan when the stock market crashed on October 19, 1987,
Black Monday. My desk in the old headquarters at 23 Wall Street looked out on the floor of the New York Stock
Exchange. “What have I gotten myself into?” I asked myself.
At the time, the double-dip recessions of the early 1980s were fresh in people’s minds and a downturn seemed
inevitable. But the stock market regained its previous highs in less than a year and a U.S. recession did not arrive
for several years, not until 1990.
Coming into Black Monday, stocks were overvalued and investors were complacent. Portfolio insurance
“guaranteed” downside protection – until it didn’t. Portfolio insurance clearly exacerbated the 1987 sell-off. And
certainly there is an element of commonality in subsequent crises, with financial markets or financial engineering as
a causal or contributing factor.
In the normal course of things, it’s hard to think about left tail or black swan events. By definition, they are low
probability occurrences. But looking back over the past 30-plus years, these events seem to arrive with some
regularity: the Asian financial crisis and Long-Term Capital Management, the dot-com bust, the global financial
crisis, the sovereign debt crisis. Each had a slightly different contour, but each was a left tail event.
My younger colleagues find it difficult to imagine, but in October 1987 we worked without computers or cellphones.
Trading was manual and slow. Today, in the midst of a global pandemic, J.P. Morgan Asset Management is, in
essence, remotely run. That is remarkable – and a reminder to me of the fundamental resilience of the economy
and markets through all manner of crises.
 P R E V I O U S F I N A N C I A L C R I S E S : R E C O L L E C T I O N S A N D I N S I G H T S F R O M S E N I O R I N V E S T O R S A N D S T R AT E G I S T S

Sovereign debt crisis: The importance of a big-picture view

“I understood that the eurozone was first and foremost a political union.
The crisis was more about political commitment than economics.”

For the countries bound together in Europe’s monetary union, the financial crisis did not end in 2009. Indeed, for
many it was just beginning. As government debt spiraled, investors soon shifted their attention from the question of
whether banks would go bust to whether sovereigns would default. As a sell-side economist during the sovereign
Karen Ward debt crisis (which ran from roughly 2010–12), I had to form a view on whether the end result would be a breakup of
Chief Market the eurozone.
Strategist, EMEA,
While every crisis is different, the analytical toolkit we use is essentially the same. From my perspective, crises are
Global Market
much like impressionist art. Get too close to the canvas and the art is impossible to fathom. But if you step back a
Insights Strategy
few paces, it all becomes much clearer.

In a crisis, it’s essential to consider the big picture. As an economist – and a student of history – I understood that
the eurozone was first and foremost a political union. In turn, the crisis was more about political commitment than
economics. Because I didn’t doubt Germany’s commitment to the project, I expected compromises would ultimately
be made, and they were. This was far more important than understanding the minutiae of the various bailout
packages.

And I learned that it is important to step back physically as well as mentally. In the sovereign crisis, policymakers
made key decisions late on a Sunday night or in the early hours of Monday morning following a eurogroup meeting.
Staying awake to cover the press conference followed by a whole day of client meetings was physically as well as
mentally draining. Finding a way to recuperate is essential for making clear, rational decisions.

Finally, while it’s important to have a clear view, it’s equally important to challenge that view. Team culture is critical
here. Healthy debate is essential at all times, but never more so than in a crisis, when both the emotions and the
stakes run high.

From the crucible of the 2008 crisis, the expansion and evolution of real assets
“Financial crises produce winners and losers.
The real asset winners had contractual cash flows and strong counterparties.”

“Build it and they will come” was the motto of real estate investing across global markets leading up to the 2008
crisis. Working in the Middle East, I witnessed the development boom that produced some of the world’s largest
structures. Although the global financial crisis was not directly connected to emerging markets, it exposed
Pulkit Sharma, vulnerabilities that led to a prolonged real estate bust as development projects were stalled or scrapped altogether.
CFA, CAIA
In the U.S., unlike the dot-com crash where real estate values were unscathed, the 2008 mortgage meltdown
Head of Alternatives created ripple effects across private and public real estate. Cracks first appeared in real estate credit markets,
Investment Strategy which impacted public and then private real estate. Transaction volumes decreased, and a heightened need for
and Solutions liquidity led to an increase in private fund redemption queues as investors sought to withdraw capital wherever
available.

Financial crises produce winners and losers. The winners had exposures to inelastic demand sectors, contractual
cash flows and strong counterparties. Low leverage private core debt and primary markets core real estate equity
fared better than higher leverage debt, public and noncore private real estate. This period also saw the emergence
of infrastructure as an asset class. Its similar, albeit noncorrelated and more defensive, return profile relative to real
estate made it a suitable complement.

Each crisis reshapes the industry it impacts, and the global financial crisis sparked a wave of innovation and
opportunities for the next decade. These included the rise of infill logistics, renewable energy and globalization of
real estate, and the emergence of regulation-driven asset classes such as transport leasing and mezzanine real
estate. Over the long term, the safe haven characteristics of high quality cash flows of real estate and infrastructure
will remain important sources of income and diversification, and investors should be on the lookout for new sources
of sustainable innovation to further expand and evolve their exposure to real assets.

J.P. MORGAN ASSE T MAN AGE ME N T 11

P R E V I O U S F I N A N C I A L C R I S E S : R E C O L L E C T I O N S A N D I N S I G H T S F R O M S E N I O R I N V E S T O R S A N D S T R AT E G I S T S
Quant chaos in the summer of 2007
Ted Dimig
Head of U.S.
Advisory and Core
Beta Solutions,
Multi-Asset Solutions
Learning the limitations of quant models in the 2008 financial crisis
Katherine Santiago
Head of Quantitative
Research,
Multi-Asset Solutions
12 LTC MA MA R K - T O - MARK ET: CO VID- 19 – NEW CYCL E, NEW ST ART I N G POI N T
“My main takeaway from this difficult period? Plainly put, there is never just one cockroach.”
In the summer of 2007, I was a client portfolio manager at J.P. Morgan, leading our behavioral finance/quantitative
equities product team. In those days, quants ruled, investment performance was strong and we had just launched
our first long-short product. Then everything changed, seemingly overnight. The first two weeks of August – the
lead-up to the global financial crisis, as it later became clear – delivered broad-scale liquidations. Overly levered
quant strategies’ returns plunged (a 5+ standard deviation event) and as a result experienced sizable redemptions.
What had been up was now down. Our first instinct was to think that this was a temporary blip and we should thus
stay disciplined. But we quickly understood that chaos now ruled the quant world, and investors did not like chaos.
While the quants would ultimately reemerge stronger in the wake of this experience, in the subsequent two years, it
is estimated, nearly 80% of quant strategy assets were liquidated.
My main takeaway from this difficult period? Plainly put, “There is never just one cockroach.” What was happening
in the quant space proved to be an early warning sign of the financial stresses across much of the global economy.
In other words, it was one of the first but by no means the only cockroach. As a crisis emerges, it’s human nature to
find patterns that resemble prior episodes. But in reality, each crisis is different. Today I push myself to take a multi-
faceted view of the market and economic environment and try to focus on what’s different from the past. While a
historical perspective is helpful, too narrow a focus can turn into tunnel vision. Then you miss the fact that there are
a lot more cockroaches that warrant investigation.
“Understanding the limitations and biases of your models can help
you navigate your response to severe dislocations.”
I began my finance career in 2004, so the 2008 global financial crisis was my first experience with live market
disruptions. As a quant investor, I could see that implementation decisions such as improper risk sizing and leverage
overwhelmed otherwise “correct” portfolio views and positions. I learned that the true power of a robust investment
process is its ability to manage through cycles of underperformance, recalibrate to new information and risk, and
establish better positioning for the next market phase.
Understanding the limitations and biases of your models and processes can help you navigate your response to severe
dislocations. Models based more heavily on valuations may be significantly early in signaling a market peak, whereas
those based on technicals may take longer to register a turning point. Depending on the model, an investor can
evaluate the necessary speed of a response and decide whether to lean into the downturn or rebound of an event.
From a quant investing perspective, our reliance on data is a humbling element of any market dislocation. In 2008,
so many of our data series, such as Libor or other liquidity measures, which had worked reliably in prior periods,
began to fail as liquidity and market stresses impacted not only market prices but the financial system itself. This
meant that our models had difficulty interpreting the reality of current market conditions and thus could not predict
where markets were headed. Being able to understand your data, its limitations and their exact impact on your
models is essential to navigating these types of market events. In the current crisis, economic data will be equally
challenged to keep up with the fast pace of the economy’s sudden stop and the pace (as yet unknown) of the
economy’s eventual restart. Finding new sources of data to help interpret economic activity can be useful, but
investors need to think carefully before jumping into anything new and untested.
 P R E V I O U S F I N A N C I A L C R I S E S : R E C O L L E C T I O N S A N D I N S I G H T S F R O M S E N I O R I N V E S T O R S A N D S T R AT E G I S T S

Past crises reinforce the lesson—It’s not (essentially) different this time
“I am repeatedly amazed by how resilient economies and markets are.”

On October 19, 1987, when the Dow Jones Industrial Average fell 22.6%, the biggest single-day percentage decline in
U.S. history, I was working as the head of an equity sales and trading desk in the Boston office of a bulge-bracket
investment banking firm. We handled dozens of convertible bond trades that day that were priced 25% or more
below the previous day’s close. Even then, those prices were only that day’s clearing bid, as talk of further steep
Anthony Werley declines in markets ahead made every trade a risky proposition. As investment professionals seeing the carnage in
Chief Investment markets, we were convinced something important was afoot that would change markets for a long time.
Officer,
The next 32 years included other frightening market episodes: the 1998 crisis precipitated by the collapse of the
Endowments &
Russian ruble and hedge fund Long-Term Capital Management, the 2000 technology stock bust and the economic
Foundations Group
and market meltdown of the global financial crisis. Looking back, a pattern seems to emerge: Shock around a
completely unexpected (but still probable) event lends itself to wide-ranging explanations of possible outcomes that
eventually narrow as events evolve and policymakers address the crisis as best they can.

Although the 1987 crash turned out to have no significant economic impact, financial market participants, including
investors and managers, learned valuable lessons. “Portfolio insurance,” at the time the latest technique to hedge
portfolios, was discredited – and then resurfaced in other forms over the subsequent decades. And in some ways,
large investor redemptions during the 1987 crash paved the way for the market’s bull run in the 1990s.

The current crisis will have significant repercussions over the next couple of years, especially since a serious public
health crisis is unfolding along with an important economic and market event. But I am repeatedly amazed by how
resilient economies and markets are. The events of 2020 are likely to accelerate changes that are already underway
but not radically alter their basic course.

From bear markets to new opportunities

“From bear markets are forged new economic expansions,
new bull markets and new investment opportunities.”

In 2008, I watched the global financial crisis unfold from the vantage point of a derivatives desk. What has always
struck me about the acute phase of a market dislocation is how eerily quiet dealing floors become – in stark
contrast to images in the media. Asset markets may be doing somersaults, but often trading is paralyzed and the
John Bilton, CFA most frantic activity occurs behind office doors as the scale of the impact is assessed.
Head of Global Multi-
Derivatives are often associated with hedging, but the complexity of some instruments compromised their
Asset Strategy,
effectiveness – for instance, increased counterparty risk following the collapse of Lehman Brothers impaired the
Multi-Asset Solutions
value of some hedges by far more than price action in the underlying asset. Ultimately, in any market dislocation
cash is the most prized asset. Hedges are important – but they need to be simple, liquid and effective, since
converting them back into cash is critical.

In a bear market, the initial shock, where cash is in high demand, passes fairly quickly. A more drawn-out phase
then begins. Benjamin Graham noted that markets are “voting machines in the short run and weighing machines in
the long run.” The initial shock may be analogous to investors “voting” on whether sufficient cash is available, and
what follows is a weighing or calibration of the long-run impact on growth and valuations.

In the recent turmoil, central banks moved swiftly to flood markets with cash, and it is comforting that the initial
dislocation phase is calming down – even if the trajectory of the economy remains uncertain. Price discovery is now
possible, and the weighing phase can get underway. As the veteran of now four recessions and six major market
dislocations, I can clearly see that from bear markets are forged new economic expansions, new bull markets and
new investment opportunities.

J.P. MORGAN ASSE T MAN AGE ME N T 13

U.S. DOLLAR ASSUMPTIONS
Compound Return September 2019 (%)
Annualized Volatility (%)
Arithmetic Return March 2020 (%)
Compound Return March 2020 (%)
U.S. Inflation
U.S. Cash
U.S. Intermediate Treasuries
U.S. Long Treasuries
TIPS
U.S. Aggregate Bonds
U.S. Securitized
U.S. Short Duration Government/Credit
U.S. Long Duration Government/Credit
F I X E D I N CO M E
U.S. Inv Grade Corporate Bonds
U.S. Long Corporate Bonds
U.S. High Yield Bonds
U.S. Leveraged Loans
World Government Bonds hedged
World Government Bonds
World ex-U.S. Government Bonds hedged
World ex-U.S. Government Bonds
Emerging Markets Sovereign Debt
Emerging Markets Local Currency Debt
Emerging Markets Corporate Bonds
U.S. Muni 1-15 Yr Blend
U.S. Muni High Yield
U.S. Large Cap
U.S. Mid Cap
U.S. Small Cap
Euro Area Large Cap
Japanese Equity
Hong Kong Equity
UK Large Cap
EAFE Equity hedged
EAFE Equity
Emerging Markets Equity
EQUITIES
AC Asia ex-Japan Equity
AC World Equity
U.S. Equity Value Factor
U.S. Equity Momentum Factor
U.S. Equity Quality Factor
U.S. Equity Minimum Volatility Factor
U.S. Equity Dividend Yield Factor
U.S. Equity Diversified Factor
U.S. Convertible Bond hedged
Global Convertible Bond
Global Credit Sensitive Convertible
Private Equity
U.S. Core Real Estate
U.S. Value-Added Real Estate
European ex-UK Core Real Estate
Asia Pacific Core Real Estate
U.S. REITs
A LT E R N A TI V E S
Global Infrastructure Equity
Global Infrastructure Debt
Diversified Hedge Funds
Event Driven Hedge Funds
Long Bias Hedge Funds
Relative Value Hedge Funds
Macro Hedge Funds
Direct Lending
Commodities
Gold
1 4 LTC MA MA R K - T O - MARK ET: CO VID- 19 – NEW CYCL E, NEW ST ART I N G POI N T
U.S. Inflation
U.S. Intermediate
U.S. Short Duration Government/Credit
U.S. Long Treasuries
U.S. Cash
U.S. Long Duration Government/Credit
Treasuries
U.S. Aggregate Bonds
2.00 2.01 1.40 2.00 1.00
1.60 1.60 0.46 1.90 0.09 1.00
U.S. Inv Grade Corporate Bonds
2.20 2.26 3.45 2.70 -0.22 0.21 1.00
U.S. Securitized
TIPS
0.30 0.90 11.02 1.60 -0.19 0.05 0.80 1.00
U.S. Long Corporate Bonds
2.40 2.54 5.39 2.70 0.10 0.07 0.59 0.56 1.00
World Government Bonds hedged
2.80 2.86 3.42 3.10 -0.18 0.10 0.81 0.82 0.72 1.00
World ex-U.S. Government Bonds hedged
U.S. High Yield Bonds
3.00 3.03 2.46 3.30 -0.15 0.14 0.74 0.69 0.67 0.92 1.00
U.S. Leveraged Loans
2.60 2.62 1.93 2.80 -0.19 0.36 0.77 0.45 0.56 0.75 0.69 1.00
World Government Bonds
2.20 2.62 9.34 2.50 -0.19 0.00 0.69 0.90 0.62 0.92 0.74 0.53 1.00
World ex-U.S. Government Bonds
Emerging Markets Local Currency Debt
Emerging Markets Sovereign Debt
3.80 3.97 5.96 3.40 -0.09 -0.03 0.40 0.50 0.63 0.80 0.67 0.55 0.78 1.00
3.40 3.87 9.89 3.00 -0.15 -0.05 0.39 0.60 0.55 0.80 0.63 0.46 0.88 0.95 1.00
Emerging Markets Corporate Bonds
6.90 7.21 8.22 5.20 0.13 -0.11 -0.26 -0.23 0.32 0.17 0.18 0.12 0.11 0.56 0.46 1.00
5.30 5.57 7.55 5.00 0.34 -0.14 -0.53 -0.43 0.06 -0.11 -0.09 -0.15 -0.13 0.31 0.22 0.78 1.00
1.80 1.84 2.99 2.10 -0.29 0.10 0.84 0.85 0.49 0.81 0.69 0.60 0.79 0.50 0.55 -0.19 -0.44 1.00
2.40 2.60 6.43 2.50 -0.10 0.10 0.66 0.51 0.57 0.70 0.61 0.68 0.60 0.53 0.52 0.14 -0.18 0.59 1.00
U.S. Muni 1-15 Yr Blend
1.70 1.74 2.92 1.80 -0.30 0.07 0.72 0.74 0.39 0.72 0.60 0.53 0.72 0.47 0.52 -0.15 -0.38 0.97 0.53 1.00
2.60 2.91 8.00 2.40 -0.08 0.08 0.55 0.39 0.52 0.61 0.53 0.61 0.51 0.50 0.49 0.21 -0.11 0.49 0.99 0.45 1.00
U.S. Muni High Yield
6.70 7.03 8.36 5.10 0.03 -0.02 0.18 0.20 0.57 0.55 0.52 0.38 0.48 0.76 0.68 0.71 0.40 0.26 0.47 0.26 0.49 1.00
6.00 6.69 12.17 5.90 0.06 0.10 0.15 0.06 0.40 0.39 0.34 0.37 0.32 0.54 0.48 0.58 0.27 0.15 0.59 0.16 0.64 0.78 1.00
U.S. Large Cap
5.70 6.02 8.20 4.90 0.12 -0.05 0.05 0.07 0.51 0.44 0.41 0.32 0.36 0.76 0.64 0.72 0.53 0.10 0.33 0.11 0.35 0.89 0.66 1.00
2.50 2.55 3.15 2.50 -0.12 0.02 0.45 0.47 0.50 0.64 0.62 0.43 0.55 0.56 0.51 0.23 0.05 0.50 0.40 0.46 0.35 0.46 0.24 0.32 1.00
4.90 5.15 7.33 4.00 0.30 -0.08 -0.07 0.10 0.36 0.21 0.22 -0.04 0.20 0.39 0.30 0.40 0.52 0.04 -0.03 0.04 -0.03 0.43 0.15 0.44 0.47 1.00
7.20 8.14 14.34 5.60 0.05 -0.06 -0.31 -0.30 0.06 0.00 0.00 -0.06 -0.01 0.28 0.25 0.69 0.55 -0.24 0.12 -0.18 0.19 0.50 0.55 0.51 -0.02 0.18 1.00
6.70 7.91 16.30 5.90 0.09 -0.07 -0.33 -0.29 0.09 0.00 0.00 -0.07 -0.01 0.30 0.26 0.74 0.59 -0.26 0.09 -0.20 0.16 0.51 0.54 0.52 0.01 0.20 0.96
7.20 8.81 18.95 6.50 0.05 -0.08 -0.34 -0.33 0.00 -0.07 -0.06 -0.11 -0.07 0.20 0.17 0.65 0.50 -0.28 0.03 -0.22 0.10 0.41 0.48 0.41 -0.06 0.08 0.91
10.00 12.00 21.47 7.70 0.03 0.01 -0.21 -0.26 0.13 0.08 0.09 0.09 0.04 0.37 0.31 0.69 0.49 -0.18 0.30 -0.14 0.38 0.60 0.69 0.57 0.04 0.14 0.84
8.20 9.19 14.80 7.20 0.01 -0.09 -0.26 -0.19 0.10 0.07 0.04 0.03 0.10 0.38 0.36 0.61 0.46 -0.19 0.17 -0.15 0.23 0.48 0.56 0.50 -0.01 0.11 0.70
6.70 8.51 20.06 6.30 -0.01 0.02 -0.18 -0.19 0.20 0.16 0.13 0.14 0.12 0.47 0.40 0.68 0.53 -0.15 0.23 -0.12 0.28 0.63 0.67 0.64 0.14 0.26 0.69
10.10 11.35 16.84 7.60 0.09 -0.02 -0.30 -0.30 0.13 0.04 0.04 0.02 0.02 0.39 0.33 0.72 0.61 -0.26 0.21 -0.21 0.29 0.60 0.64 0.61 0.03 0.27 0.84
8.40 9.24 13.59 6.70 0.00 -0.05 -0.38 -0.32 -0.02 -0.02 -0.03 -0.08 0.00 0.31 0.29 0.70 0.59 -0.25 -0.03 -0.17 0.03 0.51 0.52 0.53 -0.01 0.19 0.88
9.20 10.46 16.81 7.20 0.05 -0.02 -0.25 -0.25 0.16 0.10 0.08 0.08 0.07 0.42 0.37 0.74 0.55 -0.20 0.29 -0.15 0.37 0.64 0.72 0.63 0.04 0.18 0.88
10.50 12.43 21.12 9.20 0.07 0.05 -0.20 -0.20 0.25 0.13 0.12 0.13 0.09 0.43 0.37 0.72 0.54 -0.17 0.30 -0.14 0.38 0.67 0.78 0.66 0.05 0.24 0.76
9.60 11.50 20.84 9.20 0.01 0.03 -0.18 -0.17 0.23 0.15 0.13 0.14 0.13 0.46 0.40 0.71 0.52 -0.13 0.28 -0.10 0.34 0.65 0.73 0.64 0.07 0.24 0.75
8.10 9.18 15.46 6.50 0.06 -0.03 -0.28 -0.28 0.14 0.06 0.05 0.03 0.04 0.38 0.33 0.75 0.58 -0.23 0.23 -0.17 0.31 0.61 0.68 0.61 0.02 0.20 0.96
9.80 10.88 15.59 7.20 0.03 -0.09 -0.31 -0.31 0.04 -0.02 0.00 -0.06 -0.03 0.27 0.23 0.70 0.53 -0.24 0.10 -0.18 0.17 0.48 0.55 0.49 -0.03 0.14 0.98
7.80 8.76 14.52 5.40 0.10 -0.07 -0.33 -0.29 0.10 0.00 0.00 -0.07 -0.01 0.28 0.25 0.71 0.58 -0.26 0.09 -0.21 0.16 0.50 0.52 0.50 0.01 0.21 0.97
7.00 7.78 13.00 5.60 0.05 -0.06 -0.28 -0.27 0.08 0.02 0.02 -0.05 0.01 0.29 0.25 0.68 0.52 -0.21 0.14 -0.16 0.20 0.51 0.56 0.50 0.00 0.17 0.99
6.10 6.70 11.37 5.80 0.03 -0.07 -0.21 -0.16 0.11 0.10 0.11 -0.02 0.10 0.34 0.32 0.68 0.51 -0.09 0.17 -0.04 0.22 0.54 0.58 0.50 0.08 0.22 0.94
8.40 9.29 14.05 6.90 0.04 -0.08 -0.24 -0.20 0.13 0.09 0.09 -0.01 0.08 0.36 0.33 0.72 0.55 -0.14 0.17 -0.09 0.23 0.56 0.60 0.53 0.10 0.22 0.95
8.90 9.67 13.08 6.30 0.08 -0.08 -0.29 -0.26 0.10 0.03 0.03 -0.05 0.02 0.31 0.28 0.71 0.56 -0.20 0.12 -0.14 0.19 0.53 0.57 0.52 0.04 0.20 0.98
7.20 7.72 10.62 4.60 0.08 -0.09 -0.30 -0.27 0.18 0.08 0.09 0.03 0.03 0.42 0.34 0.81 0.65 -0.22 0.12 -0.17 0.19 0.58 0.55 0.61 0.10 0.28 0.87
7.50 7.99 10.36 4.80 0.04 -0.06 -0.32 -0.28 0.15 0.08 0.09 0.05 0.05 0.45 0.37 0.82 0.65 -0.22 0.11 -0.16 0.18 0.62 0.58 0.66 0.10 0.27 0.86
7.10 7.33 7.00 4.40 0.15 -0.03 -0.13 -0.20 -0.01 -0.02 -0.10 -0.04 0.01 0.18 0.18 0.28 0.34 -0.10 0.06 -0.06 0.10 0.18 0.19 0.24 -0.06 0.20 0.39
9.80 11.58 20.17 8.80 0.19 0.04 -0.49 -0.54 0.04 -0.23 -0.17 -0.14 -0.31 0.18 0.04 0.67 0.63 -0.49 -0.05 -0.44 0.04 0.49 0.51 0.55 -0.07 0.33 0.73
6.60 7.17 11.07 5.80 0.34 -0.08 -0.37 -0.32 0.03 -0.19 -0.13 -0.25 -0.19 0.08 0.01 0.51 0.60 -0.36 -0.19 -0.32 -0.14 0.30 0.29 0.39 -0.19 0.44 0.53
8.70 10.02 17.18 7.70 0.34 -0.08 -0.37 -0.32 0.03 -0.19 -0.13 -0.25 -0.19 0.08 0.01 0.51 0.60 -0.36 -0.19 -0.32 -0.14 0.30 0.29 0.39 -0.19 0.44 0.53
7.50 8.67 16.04 6.90 0.32 0.01 -0.52 -0.53 0.06 -0.29 -0.24 -0.19 -0.33 0.11 -0.01 0.62 0.63 -0.53 -0.02 -0.49 0.07 0.40 0.44 0.49 -0.16 0.35 0.58
7.50 8.20 12.36 6.50 0.30 -0.05 -0.32 -0.26 0.19 -0.01 0.01 -0.12 -0.02 0.33 0.26 0.63 0.63 -0.31 0.09 -0.28 0.15 0.50 0.48 0.53 0.03 0.45 0.64
8.00 9.07 15.42 6.00 -0.02 -0.05 -0.01 0.06 0.23 0.27 0.27 0.07 0.26 0.43 0.41 0.61 0.36 0.09 0.26 0.11 0.28 0.55 0.55 0.46 0.19 0.25 0.72
6.70 7.21 10.46 6.00 0.22 -0.04 -0.27 -0.31 0.19 -0.03 0.02 0.00 -0.10 0.26 0.16 0.55 0.55 -0.28 0.17 -0.25 0.25 0.50 0.49 0.50 0.05 0.28 0.47
3.70 3.90 6.46 3.30 0.10 -0.03 0.31 0.48 0.66 0.63 0.55 0.35 0.63 0.83 0.76 0.43 0.31 0.41 0.30 0.37 0.25 0.64 0.29 0.70 0.49 0.56 0.08
5.00 5.26 7.37 4.50 0.22 0.06 -0.42 -0.33 0.11 -0.10 -0.11 -0.12 -0.08 0.25 0.19 0.60 0.65 -0.35 -0.07 -0.30 -0.01 0.39 0.35 0.45 -0.06 0.40 0.67
5.70 6.08 9.02 4.80 0.21 -0.03 -0.45 -0.45 0.07 -0.11 -0.10 -0.07 -0.13 0.28 0.20 0.77 0.75 -0.41 0.01 -0.34 0.09 0.47 0.49 0.55 -0.06 0.33 0.79
5.50 6.07 11.05 4.80 0.13 -0.03 -0.39 -0.40 0.09 -0.05 -0.06 -0.01 -0.07 0.31 0.24 0.75 0.65 -0.35 0.11 -0.30 0.20 0.51 0.58 0.55 -0.05 0.22 0.86
5.50 5.72 6.79 4.50 0.25 -0.03 -0.40 -0.37 0.18 0.00 0.02 -0.01 -0.04 0.40 0.30 0.84 0.84 -0.35 -0.02 -0.29 0.05 0.55 0.50 0.61 0.06 0.46 0.68
3.60 3.89 7.78 3.30 -0.10 0.15 0.12 0.10 0.24 0.20 0.11 0.26 0.20 0.29 0.27 0.18 0.05 0.16 0.32 0.18 0.33 0.23 0.30 0.19 0.11 0.10 0.25
8.50 9.37 13.87 7.00 0.38 -0.11 -0.49 -0.48 0.14 -0.22 -0.12 -0.23 -0.29 0.07 -0.03 0.67 0.72 -0.47 -0.26 -0.41 -0.19 0.39 0.27 0.47 -0.04 0.39 0.54
4.50 5.71 16.13 2.50 0.28 0.07 -0.14 -0.23 0.29 0.02 -0.01 0.10 -0.03 0.24 0.17 0.46 0.39 -0.25 0.28 -0.26 0.33 0.39 0.49 0.43 -0.11 0.16 0.45
3.00 4.46 17.63 3.00 0.02 0.08 0.36 0.27 0.47 0.40 0.37 0.38 0.31 0.37 0.30 0.10 -0.09 0.25 0.51 0.20 0.50 0.35 0.40 0.32 0.23 0.09 -0.03
 2 0 2 0 E S T I M AT E S A N D C O R R E L AT I O N S

U.S. DOLLAR ASSUMPTIONS

Note: All estimates on this page are in U.S. dollar terms. Given the complex risk-reward trade-offs involved, we advise clients to rely on judgment as well as quantitative
optimization approaches in setting strategic allocations to all of these asset classes and strategies. Please note that all information shown is based on qualitative analysis.
Exclusive reliance on this information is not advised. This information is not intended as a recommendation to invest in any particular asset class or strategy or as a promise
of future performance. Note that these asset class and strategy assumptions are passive only–they do not consider the impact of active management. References to future
returns are not promises or even estimates of actual returns a client portfolio may achieve. Assumptions, opinions and estimates are provided for illustrative purposes only.
They should not be relied upon as recommendations to buy or sell securities. Forecasts of financial market trends that are based on current market conditions constitute our
judgment and are subject to change without notice. We believe the information provided here is reliable, but do not warrant its accuracy or completeness. This material has
been prepared for information purposes only and is not intended to provide, and should not be relied on for, accounting, legal or tax advice.

Source: J.P. Morgan Asset Management; as of March 31, 2020. Please note that LTCMA return numbers are now rounded to the nearest 0.1% (having been nearest 0.25% in
previous years). Alternative asset classes (including hedge funds, private equity, real estate, direct lending and infrastructure) are unlike other asset categories shown above
in that there is no underlying investible index. The return estimates for these alternative asset classes and strategies are estimates of the industry average, net of manager
fees. The dispersion of return among managers of these asset classes and strategies is typically significantly wider than that of traditional asset classes. Correlations of value-
added and core real estate in their local currencies are identical since value-added local returns are scaled versions of their corresponding core real estate local returns. All
returns are nominal. For the full opportunity set, please contact your J.P. Morgan representative.
U.S. Mid Cap

Euro Area Large Cap

U.S. Small Cap

Japanese Equity

Hong Kong Equity

1.00
0.95 1.00
EAFE Equity hedged
UK Large Cap

Emerging Markets Equity

0.82 0.74 1.00

0.68 0.61 0.72 1.00
AC Asia ex-Japan Equity
EAFE Equity

0.68 0.59 0.73 0.65 1.00

U.S. Equity Momentum Factor

0.81 0.72 0.90 0.72 0.77 1.00

U.S. Equity Minimum Volatility Factor
U.S. Equity Value Factor
AC World Equity

0.86 0.79 0.88 0.79 0.73 0.88 1.00

U.S. Equity Quality Factor

0.86 0.77 0.97 0.82 0.80 0.95 0.91 1.00

U.S. Equity Dividend Yield Factor

0.77 0.67 0.83 0.68 0.88 0.83 0.76 0.87 1.00

U.S. Equity Diversified Factor

0.75 0.66 0.80 0.68 0.91 0.80 0.76 0.85 0.98 1.00
U.S. Convertible Bond hedged

0.93 0.85 0.93 0.78 0.80 0.93 0.91 0.97 0.89 0.87 1.00
Global Credit Sensitive Convertible

0.97 0.93 0.82 0.68 0.64 0.80 0.86 0.85 0.73 0.72 0.93 1.00
0.97 0.90 0.82 0.68 0.71 0.82 0.86 0.86 0.78 0.77 0.94 0.93 1.00
Global Convertible Bond

0.96 0.91 0.83 0.67 0.68 0.83 0.86 0.86 0.75 0.74 0.94 0.97 0.97 1.00
0.92 0.87 0.77 0.62 0.63 0.77 0.81 0.81 0.70 0.69 0.89 0.93 0.92 0.95 1.00
U.S. Value-Added Real Estate

0.95 0.90 0.79 0.65 0.66 0.80 0.83 0.84 0.74 0.72 0.91 0.96 0.92 0.96 0.97 1.00
European ex-UK Core Real Estate
U.S. Core Real Estate

0.98 0.92 0.82 0.68 0.68 0.81 0.86 0.86 0.75 0.74 0.94 0.97 0.97 0.98 0.97 0.97 1.00
Private Equity

0.91 0.83 0.80 0.70 0.75 0.81 0.83 0.85 0.81 0.81 0.90 0.86 0.90 0.86 0.80 0.85 0.88 1.00
Asia Pacific Core Real Estate

0.88 0.79 0.85 0.74 0.80 0.85 0.89 0.89 0.84 0.84 0.91 0.84 0.88 0.85 0.79 0.83 0.86 0.97 1.00
0.36 0.31 0.38 0.32 0.31 0.44 0.41 0.41 0.30 0.29 0.40 0.34 0.38 0.36 0.32 0.33 0.35 0.36 0.38 1.00
Global Infrastructure Equity

0.75 0.69 0.75 0.54 0.72 0.80 0.71 0.77 0.80 0.76 0.80 0.70 0.75 0.72 0.64 0.68 0.72 0.77 0.79 0.30 1.00
Global Infrastructure Debt

0.54 0.51 0.38 0.40 0.36 0.49 0.47 0.45 0.42 0.40 0.50 0.54 0.51 0.51 0.56 0.55 0.54 0.43 0.41 0.31 0.49 1.00
0.54 0.51 0.38 0.40 0.36 0.49 0.47 0.45 0.42 0.40 0.50 0.54 0.51 0.51 0.56 0.55 0.54 0.43 0.41 0.31 0.49 1.00 1.00
Diversified Hedge Funds
U.S. REITs

Event Driven Hedge Funds

0.62 0.53 0.67 0.50 0.55 0.73 0.59 0.69 0.70 0.64 0.68 0.56 0.60 0.57 0.49 0.55 0.58 0.68 0.68 0.23 0.84 0.56 0.56 1.00
0.67 0.55 0.62 0.54 0.58 0.68 0.60 0.67 0.66 0.63 0.69 0.62 0.66 0.62 0.63 0.65 0.65 0.64 0.63 0.49 0.60 0.75 0.75 0.67 1.00
Relative Value Hedge Funds
Long Bias Hedge Funds

0.75 0.73 0.63 0.51 0.47 0.59 0.62 0.65 0.55 0.55 0.69 0.74 0.69 0.73 0.80 0.80 0.75 0.64 0.60 0.19 0.43 0.61 0.61 0.38 0.61 1.00
0.45 0.38 0.54 0.39 0.59 0.59 0.40 0.55 0.60 0.56 0.55 0.44 0.47 0.44 0.40 0.43 0.44 0.48 0.47 0.07 0.62 0.47 0.47 0.62 0.51 0.34 1.00
0.11 0.01 0.14 0.15 0.27 0.21 0.10 0.18 0.24 0.27 0.15 0.06 0.10 0.08 0.15 0.15 0.12 0.25 0.26 0.08 0.18 0.17 0.17 0.16 0.28 0.25 0.25 1.00
Macro Hedge Funds

0.69 0.59 0.64 0.60 0.63 0.73 0.73 0.71 0.69 0.67 0.73 0.61 0.74 0.64 0.59 0.60 0.67 0.74 0.78 0.43 0.77 0.46 0.46 0.68 0.61 0.34 0.41 0.23 1.00
0.83 0.76 0.76 0.66 0.69 0.82 0.81 0.82 0.77 0.74 0.85 0.78 0.82 0.77 0.70 0.76 0.79 0.84 0.86 0.50 0.80 0.56 0.56 0.73 0.69 0.50 0.47 0.14 0.86 1.00
Direct Lending

0.89 0.82 0.83 0.74 0.80 0.86 0.85 0.89 0.88 0.86 0.93 0.84 0.90 0.85 0.77 0.81 0.86 0.90 0.92 0.42 0.82 0.46 0.46 0.70 0.66 0.54 0.52 0.10 0.85 0.93 1.00
Commodities

0.73 0.63 0.67 0.63 0.70 0.76 0.75 0.75 0.75 0.72 0.76 0.68 0.72 0.66 0.63 0.68 0.69 0.80 0.83 0.43 0.76 0.55 0.55 0.69 0.68 0.45 0.52 0.32 0.84 0.92 0.86 1.00
0.24 0.14 0.31 0.27 0.30 0.33 0.26 0.34 0.38 0.36 0.33 0.19 0.29 0.25 0.23 0.22 0.24 0.29 0.33 0.14 0.30 -0.08 -0.08 0.21 0.11 0.12 0.06 0.18 0.54 0.31 0.40 0.29 1.00
0.61 0.53 0.43 0.32 0.44 0.53 0.54 0.48 0.54 0.48 0.55 0.53 0.61 0.53 0.49 0.53 0.57 0.65 0.64 0.24 0.65 0.54 0.54 0.61 0.59 0.31 0.39 0.15 0.63 0.70 0.66 0.74 0.04 1.00
Gold

0.47 0.38 0.47 0.36 0.47 0.60 0.36 0.54 0.60 0.52 0.55 0.41 0.49 0.43 0.37 0.43 0.43 0.50 0.47 0.28 0.58 0.38 0.38 0.59 0.55 0.26 0.47 0.17 0.55 0.58 0.60 0.56 0.40 0.51 1.00
-0.01 -0.06 0.06 -0.02 0.22 0.10 -0.13 0.08 0.23 0.19 0.07 -0.05 0.01 -0.01 0.00 0.01 -0.01 0.09 0.09 -0.01 0.06 -0.03 -0.03 0.04 0.21 0.04 0.15 0.33 0.10 0.05 0.12 0.07 0.40 0.05 0.43 1.00

J.P. MORGAN ASSE T MAN AGE ME N T 15

STERLING ASSUMPTIONS

Compound Return September 2019 (%)

Euro Aggregate Bonds hedged

Annualized Volatility (%)

U.S. Inv Grade Corporate Bonds

U.S. Aggregate Bonds
UK Inflation

Euro Inv Grade Corp Bonds hedged

Arithmetic Return March 2020 (%)

UK Cash
Compound Return March 2020 (%)

UK Inv Grade Corporate Bonds

UK Inflation 2.00 2.01 1.75 2.00 1.00

hedged

U.S. High Yield Bonds hedged

UK Cash 1.70 1.70 0.68 1.80 -0.18 1.00

Euro High Yield Bonds hedged

U.S. Aggregate Bonds hedged 2.90 2.96 3.43 3.00 -0.20 0.20 1.00

hedged
Euro Aggregate Bonds hedged 2.50 2.56 3.54 2.20 -0.20 0.09 0.65 1.00

U.S. Leveraged Loans hedged

Euro Government Bonds hedged

U.S. Inv Grade Corporate Bonds hedged 3.90 4.07 5.97 3.30 -0.18 0.07 0.82 0.58 1.00

Global Credit hedged

Euro Inv Grade Corp Bonds hedged 3.80 3.90 4.47 3.00 -0.11 -0.06 0.51 0.70 0.78 1.00
UK Inv Grade Corporate Bonds 3.00 3.26 7.38 2.00 0.04 -0.15 0.55 0.53 0.73 0.76 1.00

World Government Bonds hedged

U.S. High Yield Bonds hedged 7.00 7.32 8.27 5.20 0.01 -0.09 0.17 0.04 0.53 0.54 0.41 1.00

UK Inflation-Linked Bonds

World ex-UK Government Bonds hedged

Euro High Yield Bonds hedged 7.60 7.94 8.54 4.80 0.01 -0.15 0.08 0.10 0.48 0.64 0.47 0.88 1.00
F I X E D I N CO M E

Emerging Markets Sovereign Debt hedged

Global Credit hedged 3.80 3.91 4.68 3.10 -0.14 0.05 0.82 0.69 0.97 0.86 0.81 0.53 0.49 1.00

World Government Bonds

World ex-UK Government Bonds

UK Gilts
U.S. Leveraged Loans hedged 5.40 5.67 7.55 4.90 0.16 -0.20 -0.11 -0.15 0.27 0.40 0.32 0.78 0.85 0.25 1.00

Emerging Markets Local Currency Debt

Euro Government Bonds hedged 2.10 2.18 4.07 1.90 -0.20 0.11 0.60 0.97 0.45 0.53 0.41 -0.10 -0.05 0.55 -0.28 1.00
UK Gilts -0.20 0.02 6.64 0.00 -0.15 0.12 0.70 0.58 0.43 0.25 0.54 -0.18 -0.23 0.49 -0.35 0.60 1.00
UK Inflation-Linked Bonds -0.70 -0.31 8.80 -1.50 -0.01 -0.05 0.53 0.33 0.41 0.26 0.52 0.16 0.06 0.46 0.01 0.29 0.67 1.00
World Government Bonds hedged 1.90 1.94 3.00 2.00 -0.21 0.19 0.81 0.82 0.51 0.36 0.41 -0.19 -0.25 0.58 -0.44 0.85 0.82 0.50 1.00
World Government Bonds 0.60 1.01 9.17 1.00 -0.18 0.24 0.50 0.44 0.19 -0.01 0.11 -0.34 -0.41 0.23 -0.54 0.50 0.65 0.39 0.71 1.00
World ex-UK Government Bonds hedged 2.10 2.14 2.86 2.20 -0.20 0.19 0.81 0.84 0.52 0.38 0.39 -0.18 -0.23 0.59 -0.43 0.87 0.77 0.47 1.00 0.68 1.00
World ex-UK Government Bonds 0.70 1.15 9.59 1.10 -0.19 0.24 0.49 0.42 0.18 -0.02 0.09 -0.35 -0.41 0.21 -0.54 0.49 0.62 0.37 0.69 0.99 0.67 1.00
Emerging Markets Sovereign Debt hedged 6.80 7.13 8.44 5.00 -0.01 0.00 0.54 0.38 0.73 0.63 0.55 0.69 0.56 0.76 0.36 0.27 0.18 0.31 0.27 0.02 0.29 0.00 1.00
Emerging Markets Local Currency Debt 4.20 4.79 11.16 4.40 -0.19 0.24 0.47 0.36 0.45 0.35 0.32 0.28 0.20 0.48 0.01 0.33 0.34 0.32 0.38 0.48 0.38 0.48 0.56 1.00
Emerging Markets Corporate Bonds hedged 5.80 6.11 8.16 4.80 0.03 -0.07 0.43 0.29 0.72 0.67 0.55 0.71 0.64 0.73 0.50 0.14 0.05 0.24 0.11 -0.12 0.13 -0.13 0.90 0.42
UK All Cap 8.30 9.06 12.96 6.30 0.11 -0.14 0.09 0.06 0.39 0.46 0.44 0.67 0.65 0.40 0.52 -0.04 -0.07 0.15 -0.15 -0.15 -0.15 -0.14 0.57 0.43
UK Large Cap 8.30 9.08 13.15 6.10 0.10 -0.14 0.10 0.07 0.39 0.45 0.44 0.65 0.63 0.41 0.50 -0.02 -0.05 0.17 -0.12 -0.12 -0.12 -0.11 0.57 0.45
UK Small Cap 8.20 9.29 15.52 7.10 0.10 -0.18 0.00 0.00 0.31 0.43 0.37 0.65 0.66 0.33 0.55 -0.11 -0.14 0.05 -0.23 -0.28 -0.23 -0.29 0.47 0.25
U.S. Large Cap 5.40 6.25 13.54 4.10 0.06 -0.16 0.06 0.08 0.21 0.29 0.29 0.48 0.40 0.25 0.32 0.02 0.03 0.20 -0.05 0.11 -0.05 0.11 0.37 0.48
U.S. Large Cap hedged 7.30 8.23 14.31 5.50 0.08 -0.20 -0.03 -0.03 0.26 0.38 0.30 0.68 0.63 0.28 0.54 -0.12 -0.22 0.00 -0.26 -0.35 -0.25 -0.35 0.49 0.28
Euro Area Large Cap 8.20 9.72 18.43 6.20 -0.02 -0.05 0.12 0.08 0.35 0.38 0.38 0.61 0.59 0.38 0.38 0.01 -0.05 0.16 -0.09 -0.04 -0.08 -0.03 0.56 0.52
Euro Area Large Cap hedged 9.30 10.50 16.43 7.10 0.04 -0.18 -0.03 0.04 0.29 0.44 0.38 0.67 0.70 0.32 0.57 -0.05 -0.20 0.02 -0.24 -0.38 -0.23 -0.37 0.49 0.26
Euro Area Small Cap 6.70 8.40 19.40 6.40 0.01 -0.10 0.11 0.05 0.36 0.38 0.37 0.63 0.61 0.38 0.42 -0.02 -0.08 0.13 -0.11 -0.04 -0.10 -0.04 0.55 0.47
EQUITIES

Euro Area Small Cap hedged 7.80 9.15 17.32 7.30 0.04 -0.20 -0.04 0.01 0.30 0.44 0.38 0.69 0.74 0.32 0.61 -0.09 -0.23 -0.01 -0.27 -0.37 -0.26 -0.37 0.47 0.23
Japanese Equity 6.40 7.21 13.26 5.70 -0.07 -0.08 0.12 0.12 0.32 0.33 0.30 0.40 0.34 0.33 0.25 0.07 0.03 0.18 -0.01 0.10 -0.01 0.11 0.32 0.45
Japanese Equity hedged 8.10 9.58 18.16 7.20 0.08 -0.19 -0.20 -0.09 0.12 0.28 0.20 0.51 0.51 0.13 0.49 -0.16 -0.33 -0.08 -0.38 -0.55 -0.37 -0.54 0.29 0.09
AC Asia ex-Japan Equity 7.80 9.31 18.34 7.70 -0.01 -0.02 0.21 0.13 0.45 0.43 0.36 0.61 0.54 0.46 0.38 0.05 0.03 0.18 0.00 0.00 0.00 0.00 0.60 0.59
Emerging Markets Equity 8.70 10.21 18.46 7.70 0.05 -0.03 0.18 0.08 0.42 0.40 0.34 0.64 0.56 0.43 0.41 0.00 -0.01 0.20 -0.05 -0.02 -0.04 -0.01 0.65 0.63
AC World Equity 6.30 7.13 13.39 5.00 0.05 -0.11 0.12 0.09 0.35 0.39 0.37 0.61 0.53 0.37 0.40 0.02 0.00 0.21 -0.06 0.05 -0.06 0.05 0.54 0.57
AC World ex-UK Equity 6.20 7.05 13.57 5.00 0.04 -0.11 0.12 0.09 0.34 0.38 0.37 0.60 0.52 0.37 0.39 0.02 0.01 0.22 -0.06 0.06 -0.06 0.07 0.53 0.58
Developed World Equity 6.10 6.91 13.21 4.80 0.04 -0.12 0.11 0.09 0.32 0.38 0.37 0.59 0.51 0.35 0.39 0.02 0.01 0.21 -0.06 0.06 -0.06 0.06 0.50 0.55
Global Convertible Bond hedged 7.60 8.09 10.31 4.70 -0.02 -0.11 0.07 0.05 0.44 0.52 0.37 0.81 0.77 0.43 0.65 -0.07 -0.22 -0.01 -0.24 -0.39 -0.23 -0.39 0.61 0.29
Global Credit Sensitive Convertible hedged 7.20 7.43 7.11 4.30 0.12 -0.26 -0.07 0.07 0.16 0.33 0.36 0.24 0.36 0.21 0.32 -0.02 -0.18 -0.08 -0.15 -0.20 -0.14 -0.20 0.17 0.01
Private Equity 8.00 9.19 16.22 7.30 0.14 -0.16 -0.23 -0.21 0.05 0.18 0.20 0.44 0.41 0.07 0.39 -0.30 -0.25 0.07 -0.35 -0.22 -0.36 -0.22 0.27 0.15
U.S. Core Real Estate 4.80 5.31 10.43 4.30 0.43 -0.42 -0.19 -0.17 -0.01 0.15 0.25 0.39 0.36 0.04 0.51 -0.24 -0.22 0.14 -0.29 -0.43 -0.28 -0.44 0.19 -0.11
European ex-UK Core Real Estate 5.70 6.55 13.54 5.40 0.25 -0.33 -0.36 -0.28 -0.08 0.02 0.02 0.37 0.32 -0.09 0.40 -0.33 -0.41 0.03 -0.44 -0.32 -0.43 -0.32 0.15 -0.09
European ex-UK Value-Added Real Estate 8.40 10.26 20.54 7.90 0.29 -0.37 -0.41 -0.34 -0.09 0.02 0.02 0.45 0.39 -0.11 0.51 -0.39 -0.47 0.00 -0.52 -0.48 -0.51 -0.49 0.17 -0.20
UK Core Real Estate 6.30 7.50 16.19 5.50 0.28 -0.36 -0.36 -0.33 -0.11 0.01 -0.03 0.45 0.40 -0.12 0.59 -0.37 -0.44 -0.10 -0.50 -0.70 -0.48 -0.71 0.14 -0.40
U.S. REITs 6.20 7.41 16.27 4.50 0.07 -0.15 0.27 0.21 0.33 0.32 0.42 0.46 0.33 0.39 0.23 0.17 0.24 0.38 0.20 0.20 0.20 0.20 0.42 0.48
A LT E R NA T I VE S

European REITs
Global Infrastructure Equity
Mezzanine Debt
Diversified Hedge Funds hedged
Event Driven Hedge Funds hedged
Long Bias Hedge Funds hedged
Relative Value Hedge Funds hedged
Macro Hedge Funds hedged
Commodities
Gold
6.40 7.92 18.29 5.90 0.01 -0.15 0.23 0.24 0.39 0.46 0.48 0.55 0.50 0.45 0.30 0.17 0.11 0.24 0.10 0.00 0.10 0.00 0.54 0.43
4.90 5.32 9.48 4.50 0.03 -0.11 0.13 0.14 0.04 0.03 0.17 -0.05 -0.06 0.09 -0.04 0.14 0.28 0.37 0.16 0.26 0.15 0.23 0.07 0.21
6.90 7.58 12.18 6.30 -0.10 -0.01 0.34 0.26 0.40 0.33 0.32 0.40 0.31 0.41 0.26 0.20 0.29 0.44 0.23 0.45 0.22 0.44 0.35 0.52
5.10 5.35 7.28 4.40 0.18 -0.16 -0.12 -0.11 0.21 0.33 0.30 0.59 0.64 0.22 0.64 -0.22 -0.31 0.00 -0.37 -0.50 -0.35 -0.51 0.37 0.05
5.80 6.18 8.99 4.70 0.16 -0.18 -0.13 -0.13 0.25 0.41 0.31 0.76 0.78 0.25 0.75 -0.27 -0.37 -0.04 -0.43 -0.52 -0.42 -0.52 0.45 0.15
5.60 6.17 11.00 4.70 0.07 -0.11 -0.07 -0.11 0.29 0.39 0.28 0.74 0.72 0.28 0.65 -0.23 -0.32 -0.06 -0.38 -0.48 -0.36 -0.47 0.50 0.24
5.60 5.81 6.75 4.40 0.12 -0.11 -0.01 -0.06 0.37 0.48 0.38 0.83 0.83 0.37 0.84 -0.20 -0.33 0.03 -0.36 -0.52 -0.34 -0.52 0.53 0.17
3.70 3.99 7.84 3.20 -0.08 0.18 0.19 0.20 0.29 0.25 0.25 0.16 0.17 0.29 0.04 0.16 0.13 0.15 0.16 0.08 0.16 0.08 0.22 0.18
2.70 3.62 13.94 1.00 0.20 -0.02 0.08 -0.11 0.17 0.08 0.10 0.30 0.16 0.15 0.21 -0.16 -0.08 0.17 -0.10 0.08 -0.09 0.08 0.30 0.34
1.20 2.79 18.31 1.50 -0.11 0.17 0.43 0.22 0.29 0.08 0.14 -0.07 -0.17 0.28 -0.27 0.21 0.39 0.28 0.40 0.50 0.39 0.50 0.21 0.42

1 6 LTC MA MA R K - T O - MARK ET: CO VID- 19 – NEW CYCL E, NEW ST ART I N G POI N T

 2 0 2 0 E S T I M AT E S A N D C O R R E L AT I O N S

STERLING ASSUMPTIONS
Note: All estimates on this page are in sterling terms. Given the complex risk-reward trade-offs involved, we advise clients to rely on judgment as well as quantitative
optimization approaches in setting strategic allocations to all of these asset classes and strategies. Please note that all information shown is based on qualitative analysis.
Exclusive reliance on this information is not advised. This information is not intended as a recommendation to invest in any particular asset class or strategy or as a promise
of future performance. Note that these asset class and strategy assumptions are passive only–they do not consider the impact of active management. References to future
returns are not promises or even estimates of actual returns a client portfolio may achieve. Assumptions, opinions and estimates are provided for illustrative purposes only.
They should not be relied upon as recommendations to buy or sell securities. Forecasts of financial market trends that are based on current market conditions constitute our
judgment and are subject to change without notice. We believe the information provided here is reliable, but do not warrant its accuracy or completeness. This material has
been prepared for information purposes only and is not intended to provide, and should not be relied on for, accounting, legal or tax advice.

Source: J.P. Morgan Asset Management; as of March 31, 2020. Please note that LTCMA return numbers are now rounded to the nearest 0.1% (having been nearest 0.25% in
previous years). Alternative asset classes (including hedge funds, private equity, real estate, direct lending and infrastructure) are unlike other asset categories shown above
in that there is no underlying investible index. The return estimates for these alternative asset classes and strategies are estimates of the industry average, net of manager
fees. The dispersion of return among managers of these asset classes and strategies is typically significantly wider than that of traditional asset classes. Correlations of value-
added and core real estate in their local currencies are identical since value-added local returns are scaled versions of their corresponding core real estate local returns. All
returns are nominal. For the full opportunity set, please contact your J.P. Morgan representative.
Emerging Markets Corporate
Bonds hedged
UK All Cap

UK Large Cap

UK Small Cap

U.S. Large Cap hedged

1.00
U.S. Large Cap

Euro Area Large Cap hedged

0.57 1.00
Euro Area Large Cap

0.56 0.99 1.00

Euro Area Small Cap hedged

0.51 0.85 0.80 1.00

Euro Area Small Cap

0.35 0.77 0.77 0.63 1.00

0.51 0.82 0.81 0.75 0.81 1.00
Japanese Equity hedged

0.51 0.88 0.87 0.75 0.75 0.79 1.00

Japanese Equity

AC Asia ex-Japan Equity

0.51 0.86 0.84 0.79 0.67 0.84 0.87 1.00

Emerging Markets Equity

0.53 0.86 0.83 0.84 0.70 0.74 0.93 0.81 1.00

Global Credit Sensitive Convertible hedged

0.52 0.83 0.79 0.89 0.61 0.79 0.81 0.92 0.88 1.00
Global Convertible Bond hedged
AC World ex-UK Equity

0.33 0.60 0.60 0.48 0.64 0.50 0.60 0.53 0.57 0.52 1.00
AC World Equity

Developed World Equity

0.36 0.61 0.59 0.61 0.48 0.67 0.57 0.71 0.54 0.67 0.69 1.00
0.58 0.74 0.73 0.62 0.67 0.66 0.74 0.64 0.74 0.64 0.57 0.48 1.00
European ex-UK Value-Added Real Estate

0.62 0.76 0.76 0.63 0.67 0.68 0.76 0.65 0.77 0.66 0.55 0.48 0.97 1.00
European ex-UK Core Real Estate

0.51 0.89 0.89 0.74 0.94 0.84 0.89 0.78 0.85 0.74 0.71 0.58 0.83 0.84 1.00
0.50 0.87 0.87 0.72 0.95 0.84 0.88 0.77 0.84 0.73 0.72 0.57 0.83 0.84 1.00 1.00
U.S. Core Real Estate
Private Equity

0.48 0.88 0.88 0.73 0.96 0.85 0.88 0.78 0.83 0.73 0.72 0.58 0.78 0.79 1.00 0.99 1.00
0.66 0.83 0.81 0.82 0.64 0.86 0.79 0.85 0.80 0.86 0.53 0.71 0.75 0.76 0.78 0.77 0.76 1.00
0.25 0.37 0.36 0.32 0.22 0.37 0.31 0.39 0.30 0.39 0.19 0.27 0.20 0.21 0.28 0.27 0.28 0.37 1.00
UK Core Real Estate

0.33 0.67 0.66 0.63 0.61 0.59 0.57 0.56 0.56 0.53 0.33 0.43 0.61 0.63 0.67 0.67 0.66 0.60 0.32 1.00
Global Infrastructure Equity

0.28 0.30 0.28 0.32 0.33 0.43 0.14 0.35 0.17 0.33 0.13 0.35 0.15 0.19 0.29 0.28 0.29 0.27 0.30 0.26 1.00
Diversified Hedge Funds hedged

0.26 0.49 0.48 0.48 0.34 0.40 0.39 0.40 0.46 0.45 0.21 0.39 0.33 0.41 0.42 0.41 0.41 0.48 0.27 0.70 0.36 1.00
European REITs

Event Driven Hedge Funds hedged

U.S. REITs

0.29 0.47 0.45 0.50 0.31 0.44 0.34 0.45 0.41 0.49 0.18 0.46 0.32 0.40 0.38 0.37 0.37 0.52 0.22 0.67 0.48 0.96 1.00
0.26 0.20 0.17 0.31 0.10 0.35 0.01 0.35 0.08 0.37 -0.03 0.41 0.10 0.15 0.10 0.09 0.09 0.39 0.00 0.30 0.64 0.50 0.70 1.00
Long Bias Hedge Funds hedged

Relative Value Hedge Funds hedged

Mezzanine Debt

0.33 0.57 0.57 0.45 0.74 0.56 0.56 0.47 0.54 0.43 0.47 0.26 0.50 0.51 0.70 0.71 0.72 0.43 0.06 0.31 0.54 0.23 0.22 0.14 1.00
0.44 0.71 0.69 0.69 0.57 0.62 0.74 0.67 0.74 0.66 0.41 0.38 0.50 0.52 0.66 0.65 0.66 0.59 0.27 0.38 0.31 0.38 0.34 0.08 0.67 1.00
Macro Hedge Funds hedged

0.01 0.05 0.07 -0.06 0.21 -0.02 0.02 -0.08 -0.08 -0.17 0.13 -0.07 0.03 0.06 0.15 0.15 0.15 -0.14 0.02 0.19 0.06 0.02 -0.03 -0.20 0.17 0.04 1.00
0.32 0.36 0.37 0.28 0.57 0.13 0.34 0.19 0.33 0.20 0.46 0.04 0.43 0.40 0.52 0.53 0.53 0.24 -0.06 0.33 0.07 0.16 0.10 -0.06 0.53 0.30 0.35 1.00
0.44 0.65 0.63 0.69 0.43 0.67 0.54 0.69 0.61 0.76 0.38 0.64 0.54 0.58 0.56 0.55 0.54 0.78 0.43 0.61 0.35 0.54 0.59 0.47 0.17 0.35 -0.12 0.06 1.00
0.55 0.74 0.71 0.77 0.52 0.79 0.64 0.76 0.70 0.83 0.40 0.66 0.60 0.64 0.65 0.64 0.63 0.86 0.49 0.62 0.45 0.55 0.60 0.47 0.31 0.48 -0.13 0.11 0.87 1.00
Commodities

0.55 0.78 0.75 0.78 0.58 0.86 0.72 0.80 0.75 0.84 0.47 0.70 0.72 0.75 0.73 0.72 0.71 0.92 0.40 0.61 0.32 0.46 0.51 0.38 0.33 0.50 -0.12 0.08 0.86 0.93 1.00
0.61 0.67 0.65 0.69 0.42 0.68 0.56 0.70 0.61 0.75 0.38 0.62 0.58 0.62 0.57 0.56 0.55 0.83 0.42 0.57 0.45 0.49 0.56 0.51 0.27 0.43 -0.06 0.22 0.84 0.92 0.86 1.00
0.19 0.30 0.31 0.21 0.14 0.22 0.27 0.22 0.29 0.26 0.18 0.12 0.32 0.34 0.27 0.26 0.25 0.31 0.16 0.30 -0.15 0.22 0.15 -0.13 0.03 0.15 0.01 0.00 0.53 0.29 0.37 0.28 1.00
Gold

0.32 0.40 0.42 0.25 0.33 0.29 0.29 0.16 0.32 0.19 0.19 0.09 0.39 0.48 0.41 0.41 0.39 0.30 0.16 0.37 0.18 0.36 0.32 0.08 0.23 0.19 0.08 0.28 0.36 0.37 0.39 0.36 0.34 1.00
0.14 -0.04 -0.02 -0.14 -0.01 -0.22 -0.05 -0.26 -0.01 -0.22 -0.04 -0.41 0.12 0.15 0.03 0.03 0.00 -0.11 -0.14 -0.11 -0.25 -0.23 -0.31 -0.40 0.09 -0.02 0.19 0.32 -0.11 -0.19 -0.12 -0.14 0.31 0.42 1.00

J.P. MORGAN ASSE T MAN AGE ME N T 17

EURO ASSUMPTIONS

Compound Return September 2019 (%)

Euro Inflation

U.S. Inv Grade Corporate Bonds

Annualized Volatility (%)

U.S. Aggregate Bonds

Euro Aggregate Bonds

Arithmetic Return March 2020 (%)

Euro Cash

Euro Inv Grade Corp Bonds

Compound Return March 2020 (%)

U.S. High Yield Bonds hedged

Euro Inflation

hedged
1.30 1.32 1.81 1.30 1.00
Euro Cash 0.60 0.60 0.63 0.60 -0.15 1.00

U.S. Leveraged Loans hedged

Euro High Yield Bonds
U.S. Aggregate Bonds hedged

hedged
1.70 1.76 3.45 1.80 -0.23 0.21 1.00

Euro Govt Inflation-Linked Bonds

Euro Aggregate Bonds 1.40 1.46 3.63 0.90 -0.24 0.14 0.66 1.00

World Government Bonds hedged

Euro Government Bonds

World ex-Euro Government Bonds hedged

U.S. Inv Grade Corporate Bonds hedged 2.80 2.98 6.02 2.10 -0.23 0.11 0.82 0.58 1.00
Euro Inv Grade Corp Bonds 2.60 2.70 4.59 1.70 -0.21 0.03 0.53 0.71 0.78 1.00
U.S. High Yield Bonds hedged

World Government Bonds

5.90 6.22 8.27 3.90 -0.01 -0.08 0.16 0.03 0.54 0.54 1.00

World ex-Euro Government Bonds

Emerging Markets Sovereign Debt hedged

Euro High Yield Bonds 6.50 6.87 8.88 3.60 -0.06 -0.13 0.06 0.12 0.46 0.65 0.86 1.00
F I X ED I N CO M E

Global Multiverse Bonds hedged

U.S. Leveraged Loans hedged 4.30 4.57 7.57 3.70 0.04 -0.17 -0.08 -0.13 0.29 0.41 0.81 0.87 1.00

Emerging Markets Local Currency Debt

Euro Government Bonds 1.00 1.08 4.13 0.70 -0.21 0.14 0.60 0.97 0.46 0.55 -0.10 -0.04 -0.27 1.00
Euro Govt Inflation-Linked Bonds 1.30 1.41 4.80 0.80 -0.09 0.13 0.56 0.76 0.58 0.67 0.31 0.29 0.07 0.73 1.00
World Government Bonds hedged 0.80 0.84 3.01 0.80 -0.20 0.20 0.81 0.83 0.52 0.39 -0.20 -0.25 -0.42 0.86 0.58 1.00
World Government Bonds 0.60 0.86 7.32 0.60 -0.22 0.15 0.35 0.47 0.16 0.13 -0.35 -0.27 -0.30 0.48 0.15 0.57 1.00
World ex-Euro Government Bonds hedged 0.60 0.64 2.94 0.80 -0.15 0.21 0.83 0.61 0.49 0.22 -0.25 -0.36 -0.46 0.64 0.40 0.94 0.53 1.00
World ex-Euro Government Bonds 0.40 0.88 9.85 0.50 -0.21 0.15 0.26 0.32 0.07 0.04 -0.36 -0.28 -0.28 0.33 0.03 0.45 0.97 0.44 1.00
Global Multiverse Bonds hedged 1.60 1.64 2.95 1.30 -0.24 0.20 0.94 0.83 0.82 0.68 0.19 0.14 -0.06 0.78 0.70 0.88 0.40 0.82 0.28 1.00
Emerging Markets Sovereign Debt hedged 5.70 6.04 8.47 3.80 0.03 -0.01 0.53 0.34 0.73 0.60 0.69 0.52 0.38 0.25 0.51 0.24 -0.20 0.21 -0.29 0.54 1.00
Emerging Markets Local Currency Debt 4.20 4.60 9.23 4.00 -0.09 0.09 0.32 0.36 0.45 0.50 0.39 0.37 0.28 0.29 0.40 0.23 0.28 0.14 0.23 0.41 0.53 1.00
Emerging Markets Corporate Bonds hedged 4.70 5.01 8.10 3.60 0.02 -0.08 0.42 0.26 0.72 0.64 0.72 0.63 0.53 0.12 0.42 0.08 -0.22 0.06 -0.29 0.43 0.90 0.48
European Large Cap 7.80 8.72 14.24 5.40 0.05 -0.22 -0.03 0.05 0.31 0.48 0.68 0.74 0.63 -0.05 0.27 -0.25 -0.29 -0.34 -0.32 0.05 0.48 0.42
European Small Cap 7.40 8.61 16.37 6.30 0.03 -0.22 -0.06 0.00 0.29 0.46 0.70 0.77 0.67 -0.12 0.22 -0.30 -0.32 -0.38 -0.33 0.01 0.43 0.33
U.S. Large Cap 5.40 6.27 13.67 3.70 0.04 -0.24 -0.12 0.02 0.12 0.34 0.48 0.53 0.52 -0.05 0.13 -0.23 0.03 -0.33 0.03 -0.03 0.19 0.44
U.S. Large Cap hedged 6.10 7.05 14.39 4.30 0.13 -0.24 -0.03 -0.04 0.25 0.37 0.67 0.60 0.54 -0.12 0.21 -0.26 -0.49 -0.31 -0.53 0.02 0.50 0.27
Euro Area Large Cap 8.20 9.41 16.43 5.80 0.06 -0.20 -0.02 0.04 0.30 0.44 0.66 0.70 0.57 -0.04 0.30 -0.23 -0.39 -0.32 -0.42 0.06 0.49 0.36
Euro Area Small Cap 6.70 8.05 17.26 6.00 0.02 -0.20 -0.02 0.03 0.32 0.45 0.68 0.73 0.61 -0.06 0.28 -0.25 -0.39 -0.33 -0.42 0.05 0.47 0.31
UK Large Cap 8.30 9.22 14.23 5.70 0.04 -0.25 -0.07 0.01 0.29 0.46 0.64 0.72 0.67 -0.10 0.18 -0.29 -0.16 -0.37 -0.18 0.00 0.40 0.44
UK Large Cap hedged 7.20 8.00 13.19 4.90 0.04 -0.12 0.12 0.09 0.40 0.46 0.64 0.59 0.49 0.01 0.31 -0.10 -0.36 -0.16 -0.39 0.18 0.55 0.36
EQUITIES

Japanese Equity 6.40 7.32 14.12 5.30 -0.07 -0.17 -0.05 0.07 0.23 0.36 0.40 0.46 0.44 -0.01 0.17 -0.18 0.11 -0.27 0.11 0.02 0.17 0.46
Japanese Equity hedged 7.00 8.44 17.83 6.00 0.10 -0.04 -0.17 -0.09 0.13 0.26 0.49 0.49 0.46 -0.15 0.17 -0.35 -0.51 -0.43 -0.53 -0.11 0.30 0.25
Emerging Markets Equity 8.70 10.00 17.07 7.30 0.06 -0.12 0.05 0.05 0.37 0.46 0.68 0.67 0.60 -0.06 0.28 -0.20 -0.23 -0.27 -0.26 0.10 0.55 0.61
AC Asia ex-Japan Equity 7.80 9.16 17.38 7.30 0.00 -0.12 0.08 0.09 0.39 0.48 0.64 0.64 0.56 -0.01 0.28 -0.15 -0.16 -0.22 -0.18 0.14 0.50 0.57
AC World Equity 6.30 7.09 13.06 4.60 0.02 -0.22 -0.06 0.05 0.26 0.45 0.63 0.68 0.63 -0.05 0.22 -0.25 -0.10 -0.35 -0.12 0.03 0.37 0.52
AC World ex-EMU Equity 6.10 6.89 13.07 4.50 0.02 -0.22 -0.07 0.05 0.25 0.44 0.61 0.66 0.62 -0.05 0.20 -0.25 -0.05 -0.35 -0.07 0.02 0.34 0.53
Developed World Equity 6.10 6.89 13.05 4.40 0.02 -0.23 -0.07 0.04 0.24 0.43 0.61 0.66 0.61 -0.05 0.21 -0.25 -0.08 -0.35 -0.10 0.02 0.33 0.49
Global Convertible Bond hedged 6.50 6.99 10.32 3.40 -0.01 -0.11 0.07 0.06 0.44 0.52 0.81 0.76 0.66 -0.06 0.31 -0.24 -0.47 -0.32 -0.51 0.12 0.61 0.34
Global Credit Sensitive Convertible hedged 6.00 6.22 6.88 3.10 0.00 -0.22 -0.02 0.10 0.18 0.34 0.28 0.40 0.32 0.02 0.08 -0.10 -0.17 -0.15 -0.19 0.05 0.17 0.11
Private Equity 8.00 9.59 18.85 6.90 0.22 -0.22 -0.29 -0.27 0.05 0.18 0.55 0.54 0.59 -0.37 -0.06 -0.47 -0.22 -0.48 -0.19 -0.26 0.29 0.34
U.S. Core Real Estate 4.80 5.63 13.32 3.90 0.18 -0.37 -0.14 -0.16 0.05 0.15 0.41 0.41 0.52 -0.23 -0.04 -0.27 0.05 -0.27 0.09 -0.13 0.21 0.43
European ex-UK Core Real Estate 5.70 6.33 11.60 5.00 0.19 -0.35 -0.37 -0.33 -0.04 0.05 0.51 0.49 0.62 -0.39 -0.12 -0.54 -0.22 -0.55 -0.19 -0.37 0.20 0.22
European ex-UK Value-Added Real Estate 8.40 9.95 18.64 7.50 0.19 -0.35 -0.37 -0.33 -0.04 0.05 0.51 0.49 0.62 -0.39 -0.12 -0.54 -0.22 -0.55 -0.19 -0.37 0.20 0.22
U.S. REITs 6.20 7.20 14.78 4.10 0.02 -0.19 0.20 0.19 0.31 0.37 0.45 0.39 0.33 0.15 0.30 0.12 0.13 0.06 0.12 0.26 0.33 0.48
Global ex-U.S. REITs 6.80 7.75 14.38 5.10 -0.03 -0.26 0.20 0.23 0.45 0.54 0.60 0.65 0.55 0.13 0.31 0.04 0.05 -0.04 0.01 0.29 0.50 0.58
A LT E R NA T I VE S

Global Infrastructure Equity 4.90 5.40 10.27 4.10 0.14 -0.21 -0.06 -0.08 0.04 0.08 0.30 0.31 0.41 -0.11 0.01 -0.16 0.21 -0.18 0.22 -0.05 0.18 0.37
Mezzanine Debt 6.90 7.70 13.18 5.90 -0.10 -0.13 0.10 0.19 0.27 0.37 0.36 0.41 0.44 0.11 0.16 0.02 0.50 -0.06 0.51 0.17 0.12 0.52
Diversified Hedge Funds hedged 4.00 4.25 7.24 3.20 0.07 -0.17 -0.10 -0.11 0.23 0.32 0.62 0.66 0.64 -0.21 0.13 -0.36 -0.43 -0.40 -0.44 -0.08 0.39 0.22
Event Driven Hedge Funds hedged 4.70 5.08 8.98 3.50 0.11 -0.18 -0.12 -0.13 0.26 0.40 0.78 0.78 0.76 -0.25 0.15 -0.42 -0.51 -0.46 -0.52 -0.08 0.47 0.27
Long Bias Hedge Funds hedged 4.50 5.07 10.99 3.50 0.07 -0.14 -0.07 -0.10 0.30 0.39 0.74 0.71 0.66 -0.21 0.19 -0.37 -0.56 -0.41 -0.58 -0.03 0.51 0.28
Relative Value Hedge Funds hedged 4.50 4.72 6.78 3.20 0.03 -0.08 0.01 -0.05 0.39 0.49 0.85 0.84 0.85 -0.19 0.21 -0.34 -0.40 -0.39 -0.41 0.04 0.54 0.37
Macro Hedge Funds hedged 2.60 2.89 7.79 2.00 -0.10 0.20 0.21 0.22 0.31 0.25 0.17 0.16 0.05 0.18 0.30 0.17 -0.03 0.16 -0.08 0.24 0.22 0.13
Commodities 2.70 3.60 13.73 0.60 0.08 -0.10 -0.08 -0.18 0.11 0.12 0.34 0.29 0.39 -0.24 0.04 -0.28 -0.06 -0.25 -0.03 -0.10 0.16 0.27
Gold 1.20 2.60 17.10 1.10 -0.17 0.09 0.30 0.17 0.23 0.11 -0.08 -0.11 -0.13 0.15 0.07 0.26 0.40 0.31 0.40 0.27 0.11 0.30

1 8 LTC MA MA R K - T O - MARK ET: CO VID- 19 – NEW CYCL E, NEW ST ART I N G POI N T

 2 0 2 0 E S T I M AT E S A N D C O R R E L AT I O N S

EURO ASSUMPTIONS
Note: All estimates on this page are in euro terms. Given the complex risk-reward trade-offs involved, we advise clients to rely on judgment as well as quantitative
optimization approaches in setting strategic allocations to all of these asset classes and strategies. Please note that all information shown is based on qualitative analysis.
Exclusive reliance on this information is not advised. This information is not intended as a recommendation to invest in any particular asset class or strategy or as a promise
of future performance. Note that these asset class and strategy assumptions are passive only–they do not consider the impact of active management. References to future
returns are not promises or even estimates of actual returns a client portfolio may achieve. Assumptions, opinions and estimates are provided for illustrative purposes only.
They should not be relied upon as recommendations to buy or sell securities. Forecasts of financial market trends that are based on current market conditions constitute our
judgment and are subject to change without notice. We believe the information provided here is reliable, but do not warrant its accuracy or completeness. This material has
been prepared for information purposes only and is not intended to provide, and should not be relied on for, accounting, legal or tax advice.

Source: J.P. Morgan Asset Management; as of March 31, 2020. Please note that LTCMA return numbers are now rounded to the nearest 0.1% (having been nearest 0.25% in
previous years). Alternative asset classes (including hedge funds, private equity, real estate, direct lending and infrastructure) are unlike other asset categories shown above
in that there is no underlying investible index. The return estimates for these alternative asset classes and strategies are estimates of the industry average, net of manager
fees. The dispersion of return among managers of these asset classes and strategies is typically significantly wider than that of traditional asset classes. Correlations of value-
added and core real estate in their local currencies are identical since value-added local returns are scaled versions of their corresponding core real estate local returns. All
returns are nominal. For the full opportunity set, please contact your J.P. Morgan representative.
Emerging Markets Corporate

European Large Cap

Bonds hedged

European Small Cap

U.S. Large Cap hedged

U.S. Large Cap

1.00
Euro Area Large Cap

0.52 1.00
Euro Area Small Cap

0.50 0.91 1.00

UK Large Cap hedged

0.27 0.78 0.71 1.00

UK Large Cap

0.53 0.83 0.77 0.75 1.00

Japanese Equity hedged

0.52 0.97 0.88 0.70 0.84 1.00

Japanese Equity

Emerging Markets Equity

0.52 0.91 0.96 0.64 0.78 0.92 1.00

AC Asia ex-Japan Equity

0.49 0.93 0.85 0.79 0.72 0.83 0.78 1.00

Global Credit Sensitive Convertible hedged

0.54 0.85 0.76 0.61 0.80 0.84 0.80 0.79 1.00

AC World ex-EMU Equity

Global Convertible Bond hedged

0.27 0.62 0.58 0.68 0.43 0.54 0.53 0.65 0.43 1.00
AC World Equity

Developed World Equity

0.36 0.69 0.64 0.54 0.66 0.69 0.64 0.62 0.57 0.71 1.00
0.59 0.76 0.74 0.63 0.69 0.72 0.72 0.74 0.68 0.54 0.58 1.00
European ex-UK Value-Added Real Estate

0.56 0.74 0.72 0.65 0.65 0.69 0.69 0.72 0.63 0.57 0.56 0.96 1.00
European ex-UK Core Real Estate

0.44 0.91 0.85 0.94 0.82 0.84 0.80 0.90 0.75 0.74 0.67 0.81 0.81 1.00
0.42 0.88 0.82 0.96 0.79 0.79 0.75 0.88 0.72 0.75 0.64 0.80 0.80 1.00 1.00
U.S. Core Real Estate
Private Equity

0.41 0.91 0.83 0.96 0.81 0.83 0.78 0.89 0.74 0.75 0.66 0.76 0.75 1.00 0.99 1.00
0.67 0.85 0.85 0.62 0.85 0.85 0.87 0.75 0.80 0.50 0.69 0.80 0.77 0.79 0.76 0.76 1.00
0.24 0.44 0.42 0.28 0.39 0.42 0.43 0.40 0.38 0.23 0.25 0.29 0.27 0.37 0.34 0.36 0.40 1.00
Global Infrastructure Equity

0.40 0.67 0.67 0.70 0.57 0.60 0.58 0.72 0.53 0.49 0.50 0.70 0.69 0.75 0.75 0.73 0.63 0.15 1.00
Global ex-U.S. REITs

Diversified Hedge Funds hedged

0.32 0.45 0.43 0.59 0.39 0.35 0.33 0.53 0.23 0.47 0.31 0.42 0.42 0.56 0.58 0.56 0.28 0.20 0.54 1.00
Event Driven Hedge Funds hedged
U.S. REITs

0.35 0.55 0.57 0.54 0.41 0.46 0.49 0.63 0.33 0.46 0.46 0.57 0.53 0.60 0.61 0.59 0.51 0.04 0.80 0.65 1.00
Relative Value Hedge Funds hedged
Long Bias Hedge Funds hedged

0.35 0.55 0.57 0.54 0.41 0.46 0.49 0.63 0.33 0.46 0.46 0.57 0.53 0.60 0.61 0.59 0.51 0.04 0.81 0.65 1.00 1.00
Mezzanine Debt

0.29 0.56 0.48 0.70 0.55 0.51 0.46 0.53 0.50 0.46 0.31 0.44 0.45 0.66 0.66 0.67 0.43 0.12 0.41 0.66 0.37 0.37 1.00
0.51 0.77 0.73 0.70 0.63 0.69 0.68 0.77 0.66 0.58 0.42 0.66 0.65 0.79 0.78 0.78 0.63 0.34 0.55 0.57 0.49 0.49 0.74 1.00
Macro Hedge Funds hedged

0.23 0.27 0.23 0.46 0.16 0.18 0.11 0.39 0.03 0.39 0.18 0.35 0.36 0.42 0.45 0.42 0.12 -0.20 0.52 0.59 0.52 0.52 0.37 0.31 1.00
0.21 0.39 0.36 0.65 0.12 0.26 0.24 0.51 0.19 0.59 0.17 0.37 0.43 0.58 0.62 0.60 0.22 0.02 0.56 0.55 0.54 0.54 0.55 0.53 0.64 1.00
0.46 0.73 0.79 0.53 0.68 0.69 0.77 0.70 0.62 0.46 0.64 0.71 0.66 0.69 0.67 0.67 0.79 0.42 0.67 0.35 0.59 0.59 0.24 0.52 0.17 0.18 1.00
0.57 0.79 0.84 0.58 0.79 0.76 0.83 0.74 0.71 0.45 0.65 0.74 0.68 0.74 0.71 0.71 0.87 0.50 0.66 0.42 0.58 0.58 0.35 0.58 0.15 0.19 0.87 1.00
Commodities

0.57 0.80 0.84 0.59 0.86 0.79 0.84 0.72 0.75 0.46 0.69 0.81 0.75 0.76 0.74 0.73 0.92 0.42 0.63 0.30 0.49 0.49 0.34 0.56 0.12 0.10 0.87 0.93 1.00
0.63 0.74 0.78 0.53 0.67 0.69 0.75 0.72 0.64 0.48 0.61 0.75 0.69 0.70 0.68 0.67 0.83 0.42 0.66 0.45 0.60 0.60 0.33 0.60 0.28 0.32 0.84 0.92 0.85 1.00
0.19 0.24 0.24 0.07 0.22 0.24 0.28 0.21 0.32 0.10 0.16 0.31 0.27 0.20 0.18 0.17 0.33 0.14 0.15 -0.15 0.04 0.04 0.00 0.18 -0.17 -0.10 0.53 0.29 0.38 0.28 1.00
Gold

0.26 0.32 0.31 0.32 0.26 0.20 0.22 0.45 0.28 0.23 0.18 0.45 0.38 0.40 0.42 0.37 0.31 0.19 0.48 0.43 0.50 0.50 0.16 0.32 0.31 0.32 0.47 0.44 0.42 0.47 0.28 1.00
0.13 -0.20 -0.17 -0.11 -0.27 -0.26 -0.22 -0.07 -0.15 -0.10 -0.35 0.03 0.02 -0.11 -0.07 -0.12 -0.14 -0.11 0.00 0.11 -0.01 -0.01 -0.01 0.00 0.21 0.20 -0.03 -0.14 -0.13 -0.06 0.26 0.36 1.00

J.P. MORGAN ASSE T MAN AGE ME N T 19

P R E V I O U S F I N A N C I A L C R I S E S : R E C O L L E C T I O N S A N D I N S I G H T S F R O M S E N I O R I N V E S T O R S A N D S T R AT E G I S T S

ACKNOWLEDGMENTS

John Bilton, CFA Katy Thorneycroft

Head of Global Multi-Strategy, Multi-Asset Solutions Portfolio Manager, Multi-Asset Solutions

Michael Feser, CFA Karen Ward

Portfolio Manager, Multi-Asset Solutions Chief Market Strategist, EMEA, Global Market Insights Strategy

Michael Hood Nicolas Aguirre, CFA

Global Strategist, Multi-Asset Solutions Portfolio Strategist, Endowments & Foundations Group

Dr. David Kelly, CFA Diego Gilsanz

Chief Global Strategist, Head of Global Market Insights Strategy Global Strategist, Multi-Asset Solutions

Grace Koo, Ph.D. Shay Chen, CFA, CAIA

Quantitative Analyst Portfolio Manager, Multi- Asset Solutions Alternatives Investment Strategy & Solutions

Stephen Macklow-Smith Sorca Kelly-Scholte, FIA

Portfolio Manager, European Equity Group Global Strategist, Global Pension Solutions

Thushka Maharaj, DPhil, CFA Timothy Lintern

Global Strategist, Multi-Asset Solutions Global Strategist, Multi-Asset Solutions

Patrik Schöwitz, CFA Michael Akinyele

Global Strategist, Multi-Asset Solutions Global Strategist, Multi-Asset Solutions

Anthony Werley Xiao Xiao, CFA

Chief Investment Officer, Endowments & Foundations Group Quantitative Analyst, Multi-Asset Solutions

Lisa Coleman Jason Davis, CFA

Head of Global Investment Grade Corporate Credit Portfolio Manager, Global Fixed Income, Currency & Commodities

Ted Dimig Allison Schneider

Head of U.S. Advisory and Core Beta Solutions, Multi-Asset Solutions Associate, Global Insights

Jeffrey Geller, CFA Barbara Rudolph

Chief Investment Officer, Multi-Asset Solutions Senior Investment Writer, Global Insights

Patrik Jakobson Catherine Peterson

Portfolio Manager, Multi-Asset Solutions Global Head of Insights Programs

Katherine Santiago Dan Aust

Head of Quantitative Research, Multi-Asset Solutions Head of Marketing Programs, EMEA

Pulkit Sharma, CFA, CAIA Alex Tirlea

Head of Alternatives Investment Strategy and Solutions Portfolio Manager, Multi-Asset Solutions

Lee Spelman, CFA

Head of U.S. Equity

The Long-Term Capital Market Assumptions Team and Committee are grateful to many investment experts throughout the J.P. Morgan
network whose input has been incorporated into the 2020 Mark-to-market edition, including: Dave Esrig, Karthik Narayan, Kenneth Tsang,
Paul Kennedy, Justin Menne, Jason Desena, Joe Staines, Garrett Norman, Kent Zheng, Jonathan Blum, Stiofan De Burca and Paul Summer
We also want to express our utmost appreciation and gratitude to Global Creative Services for design, Mark Virgo and Jay Lonie.

2 0 LTC MA MA R K - T O - MARK ET: CO VID- 19 – NEW CYCL E, NEW ST ART I N G POI N T

 FOR INSTITUTIONAL / WHOLESALE / PROFESSIONAL CLIENTS AND QUALIFIED INVESTORS ONLY – NOT FOR RETAIL USE OR DISTRIBUTION

PORTFOLIO INSIGHTS

NOT FOR RETAIL DISTRIBUTION: This communication has been prepared exclusively for institutional, wholesale, professional clients and qualified investors only,
as defined by local laws and regulations.
JPMAM Long-Term Capital Market Assumptions: Given the complex risk-reward trade-offs involved, we advise clients to rely on judgment as well as quantitative
optimization approaches in setting strategic allocations. Please note that all information shown is based on qualitative analysis. Exclusive reliance on the above is
not advised. This information is not intended as a recommendation to invest in any particular asset class or strategy or as a promise of future performance. Note
that these asset class and strategy assumptions are passive only – they do not consider the impact of active management. References to future returns are not
promises or even estimates of actual returns a client portfolio may achieve. Assumptions, opinions and estimates are provided for illustrative purposes only. They
should not be relied upon as recommendations to buy or sell securities. Forecasts of financial market trends that are based on current market conditions constitute
our judgment and are subject to change without notice. We believe the information provided here is reliable, but do not warrant its accuracy or completeness.
This material has been prepared for information purposes only and is not intended to provide, and should not be relied on for, accounting, legal or tax advice. The
outputs of the assumptions are provided for illustration/discussion purposes only and are subject to significant limitations. “Expected” or “alpha” return estimates
are subject to uncertainty and error. For example, changes in the historical data from which it is estimated will result in different implications for asset class returns.
Expected returns for each asset class are conditional on an economic scenario; actual returns in the event the scenario comes to pass could be higher or lower, as
they have been in the past, so an investor should not expect to achieve returns similar to the outputs shown herein. References to future returns for either asset
allocation strategies or asset classes are not promises of actual returns a client portfolio may achieve. Because of the inherent limitations of all models, potential
investors should not rely exclusively on the model when making a decision. The model cannot account for the impact that economic, market, and other factors may
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