SD-01.3 — Capital Market Assumptions & House View
Business Domain: BD-01 Investment Strategy & Allocation (Front office) · Applies: BOTH
Purpose
Produces the forward-looking view of return, risk and the macro environment that allocation is built on — the capital-market assumptions (long-horizon expected return, volatility and correlation by asset class) and the house view (the firm’s official macro, thematic and asset-class outlook). Where the allocation Service Domains decide what to hold, this Service Domain supplies the expectations those decisions are made against. It is a research-and-views production capability: it produces inputs, it does not run portfolios. The CFA Institute treats capital market expectations as a discipline in its own right, upstream of allocation, and this Service Domain follows that boundary.
Service Operations
- Develop long-horizon capital-market assumptions — expected return, volatility and correlation estimates per asset class over the strategic horizon.
- Produce the macro house view — the firm’s official forward-looking view on growth, inflation, interest rates and currencies.
- Conduct thematic and regime research — the long-horizon structural themes and the market-regime analysis that shape the outlook.
- Form asset-class outlooks — the medium-term return and relative-value outlook by asset class.
- Publish and disseminate the house view — the research record and its distribution to the investment teams that consume it.
- Govern the house-view process — the cadence of review and the triggers that force the view to be revised.
Inputs and outputs
- Inputs: market and economic data; macro indicators; historical return and risk series; external and sell-side research.
- Outputs: a capital-market-assumptions set and a published house view — the long-horizon assumptions consumed by SD-01.4 Strategic Asset Allocation, the asset-class outlooks consumed by SD-01.5 Tactical & Dynamic Asset Allocation, and the macro view consumed by the selection domains BD-02 to BD-04.
Entities
- Consumes: Price & Market Data (E-08), Asset Class (E-09), Benchmark / Index (E-10).
- Owns: none. The capital-market-assumptions set and the house view are managed analytical artefacts, not master entities.
Standards
- No external standard governs capital-market-assumption production. The CFA Institute treats capital market expectations as a distinct discipline upstream of strategic asset allocation; the major asset managers publish long-horizon capital-market-assumption sets that serve as a de-facto reference.
Open extensions
- Whether a versioned capital-market-assumptions artefact warrants a reference structure, so an allocation can be traced to the assumptions it was built on.
- The boundary with SD-09.5 Investment Analytics & Insight, which produces forward-looking analytics of a different kind.