Higher inflation over the past two years has led to a higher return hurdle for investors who have established real return objectives. This has made it harder for investors to achieve their return objectives over the short term. Is this likely to be the case over the long term?

We examine this from a historical perspective and address the following:

1. To what extent does inflation reduce the probability of meeting an expected CPI + target over the intermediate to long term?
2. Is inflation the only risk non-profit organizations should seek to manage or are there other macro risk factors that are potentially as important?
3. Can investors simultaneously minimize the portfolio’s sensitivity to all macro risk factors through long-term asset allocation decisions?