Although cash may seem like a 'residual' asset class, it is actually a key component of the capital markets. First, it represents in nominal terms the least risky asset class and forms the basis from which we measure risk premiums and assess the attractiveness of equity and fixed income. Additionally, cash reflects monetary policy and the pricing of derivatives.

We base our cash projections off of current cash rates and our expectations of monetary policy. Over the longer run we expect all central banks to move toward a sustainable rate that is consistent with the level of inflation and growth of a region. Below is our projection of nominal return for cash, realized inflation and subsequent real returns from cash for the next five years for key markets. (Note: we define cash here as 3-month Libor rates or their equivalent.)