Wilmington Trust Provides 10-Year Capital Markets ForecastAdrian Cronje, Vice President and Director of Asset Allocation, Wilmin

  
    
  
  
    
      Investment experts from Wilmington Trust, one of the nation’s 
      leading wealth managers, have released a 10-year outlook for the capital 
      markets. Their forecast calls for a period in which investment returns 
      will be more modest and in a much narrower range than what has been seen 
      in recent years.
    
    
      “There are no more obvious bargains available, 
      and the reward that can be expected from taking additional risk is much 
      lower today than it was five years ago,” 
      asserted Adrian Cronje, Ph.D., CFA®, author of 
      the report. “It would be a mistake to 
      extrapolate the relatively benign conditions and high returns of the 
      last few years into the decade ahead.”
    
    
      The most probable outcome over the next 10 years, Mr. Cronje writes, is 
      that economic growth around the world will continue to be robust, making 
      inflation more likely than deflation. As a result, Wilmington Trust’s 
      strategies emphasize equities, with a bias toward large, high-quality 
      stocks in the United States and toward emerging markets within the 
      international arena. Still, there are several risks not yet reflected in 
      the capital markets that could lead to unwelcome surprises for 
      investors. Mr. Cronje, who also serves as director of asset allocation 
      and a member of Wilmington Trust’s Investment 
      Strategy Team, believes these risks include declines in labor force 
      participation and productivity in the U.S., which would raise the twin 
      threats of unexpectedly high inflation and low corporate earnings; a 
      potential currency crisis for the dollar; unintended policy mistakes by 
      any of the world’s central banks, including 
      the Federal Reserve; growing calls for greater protectionism and amended 
      tax policies that could harm economic prospects; and global geopolitical 
      disruption or another major terrorist action.
    
    
      “The low risk premiums in today’s 
      markets imply that many things are expected to go well, when they may 
      not,” Mr. Cronje said. “Diversification 
      and a long-term view will be investors’ best 
      allies, as they always have been. Diversification provides the best 
      protection against negative surprises and a long time horizon provides 
      the best chance to take advantage of the underlying cycles in capital 
      market returns.”
    
    
      Wilmington Trust’s strategies include 
      allocations to inflation-linked bonds, real estate, and commodities to 
      guard against unexpectedly high inflation; non-directional hedge funds 
      to guard against unexpectedly high levels of volatility; and fixed 
      income holdings to guard against unexpectedly low underlying economic 
      growth.
    
    
      “Our clients should participate in pleasant 
      upside surprises if the current momentum in the economy and the markets 
      continues,” Mr. Cronje said. “But 
      our main emphasis now is to design asset allocation mixes to preserve 
      wealth after inflation and taxes when risk premiums eventually widen. 
      Over the next few years, we believe that risk management will play a 
      greater role than return enhancement in the results investors 
      experience. Effective risk management is what will translate into higher 
      sustainable spending rates for clients.”
    
    
      Beyond the expected benefits from diversification, Mr. Cronje also 
      writes about other opportunities Wilmington Trust has identified for 
      protecting and growing clients’ real after 
      tax spending power. Chief among these is the ability to manage strategic 
      asset mixes through a disciplined, objective rebalancing process. “Tactical 
      asset allocation is an underappreciated source of risk reduction and 
      return enhancement,” he said. “When 
      taking a 10-year view to guide strategic allocations to stocks, it’s 
      natural to bias one’s starting point for 
      near-term tactical asset allocation toward value because it’s 
      an efficient way to capture the equity risk premium. That is one reason 
      why we recommend investors consider the use of fundamentally weighted 
      strategies in tandem with more traditional market capitalization 
      weighted approaches.”
    
    
      The purpose of Wilmington Trust’s 10-year 
      capital markets forecast is to arrive at a reasonable characterization 
      of the potential distribution of future returns and risks for public and 
      private capital markets over longer horizons; it is not to form precise 
      percentage-point predictions. The company looks out 10 years, Mr. Cronje 
      said, because anything less is too short with respect to having patience 
      with asset classes, and anything longer is too uncertain with respect to 
      projecting underlying economic conditions. The 10-year horizon also 
      serves to increase the number of asset classes the company can consider, 
      he added, because it can more readily compare the returns and risks of 
      alternative illiquid assets classes, such as private equity and real 
      estate, with their public, more liquid counterparts.
    
    
      Mr. Cronje holds a Ph.D. in Macroeconomics and Econometrics and a master’s 
      degree in Economics and Finance from the University of Cambridge, United 
      Kingdom. He earned his bachelor’s degree in 
      Economics, with honors, from the University of Cape Town, South Africa. 
      He holds the CFA Institute’s Chartered 
      Financial Analyst® designation and a 
      certificate from the U.K. Institute of Management Research.
    
    
      Wilmington Trust Corporation (NYSE:WL) is a financial services holding 
      company that provides wealth management and specialized corporate 
      services to clients throughout the United States and in many other 
      countries, and commercial banking services throughout the Delaware 
      Valley region. Its wholly owned bank subsidiary, Wilmington Trust 
      Company, was founded in 1903 and is one of the largest personal trust 
      providers in the United States and the leading retail and commercial 
      bank in Delaware. Wilmington Trust Corporation and its affiliates have 
      offices in California, Connecticut, Delaware, Florida, Georgia, 
      Maryland, Nevada, New Jersey, New York, Pennsylvania, South Carolina, 
      Vermont, the Cayman Islands, the Channel Islands, London, Dublin, and 
      Frankfurt. For more information, visit www.wilmingtontrust.com.
    
    
      CFA® and Chartered Financial 
      Analyst ® are trademarks owned by the 
      CFA Institute.
    
    
      Journalists may obtain a copy of Wilmington Trust’s 
      report, 10-Year Capital Markets Forecast 
      for Strategic Planning, from the media contacts identified at the 
      top of this press release.
    
    
      The information contained herein is not intended to be an offer or 
      solicitation for the sale of any financial product or service or a 
      recommendation or determination by Wilmington Trust that any investment 
      strategy is suitable for a specific investor. Investors should 
      seek financial advice regarding the suitability of any investment 
      strategy based on the investor’s objectives, 
      financial situation, and particular needs. Investment products 
      are not insured by the FDIC or any other governmental agency, are not 
      deposits of or other obligations of or guaranteed by Wilmington Trust or 
      any other bank or entity, and are subject to risks, including a possible 
      loss of the principal amount invested. Some investment products, 
      including hedge funds, may be available only to certain “qualified 
      investors” – that 
      is, investors who meet certain income and/or investable assets 
      thresholds. Past performance is no guarantee of future results.