Dear Investor,
After two very successful years in 2023 and 2024, global financial markets continued this positive trend throughout 2025. Both, global equity and fixed income markets, surprised with another year of high single digit or double-digit gains in many markets. The only visible outlier was long dated European government bonds, reflecting most of all doubts in the capacity of European governments to rein in debt. This problem is not unique to Europe, but U.S. long dated bonds enjoyed positive returns in 2025. As mentioned in our 2024 edition, government debt in developed markets seems to have reached levels where ‘the long bond’ can no longer be used as portfolio insurance, which has significant implications on the construction of investment portfolios.
I’m very happy to present the eighth edition of our DFO Financial Yearbook, which collates long-term risk and return information on a large group of relevant asset classes. Apart from individual asset class portraits, it also includes stress tests and timeless investment wisdom to provide a robust context for long term investors. We’ve added the current valuation of major asset classes in comparison to their past returns as well as breakeven inflation rates. Our ‘valuation traffic light’ provides guidance on whether now is a good time to invest in a certain asset class or not.
We’ve also added information on global private markets as these seem to be getting more attention from private banks which are looking to get their clients to buy into them. Please bear in mind that the displayed numbers are BEFORE the cost of a ‘feeder-vehicle’ which product providers will need to provide access to private markets. Such ‘feeder-vehicles’ can easily cost between 2-5% p.a. which will eat into the returns to the investor. This contrasts with the very low cost of implementing index strategies via index funds or ETFs!
The background of the DFO Financial Yearbook is our ambition to equip an interested audience with relevant information on long term returns which can be realistically expected in global stock and bond markets. Most clients of private and priority banks will not receive such information from their relationship managers or strategy groups, as it’s just not something they focus on. Bank(er)s need to meet short term revenue goals which often conflict with the long-term investment success of their clients. A ‘fee-only’ advisor may be a great alternative to consider!
Das Family Office is keen to shed light on the fact that long term returns essentially range from the inflation rate, which was about 2% p.a. in the last few decades, up to a little more than 10% p.a. for global shares of smaller company stocks or successful factor strategies such as quality and momentum. These are truly attractive returns. But only if investors keep their nerves when markets are tough, they will be able to compound their savings at such rates!
In the absence of a cool mind, investors will change, reshuffle, or sell their investments at the wrong time and go in circles with uninspiring results. Disappointment breeds frustration and scepticism whether long term investing is even worthwhile. I have seen this time and again, which is why I’m keen to help produce better outcomes.
Our DFO Yearbook shows that patient long term investors, who are focusing on sensible and globally diversified strategies, don’t lose money, beat inflation, and enjoy attractive equity risk premia, no matter the size of their individual wallet. All it takes is to combine global stock and bond investments in a way that fits your individual context and cash flows.
Whilst we do our best to help clients manage their emotions, we can’t force them to stick to sensible investment (re)solutions. What we do know, is that global financial markets are generous to the sensible and patient investor. We have therefore established an investment framework comprised of asset allocation recommendations and investment building blocks, which helps investors to take better decisions. As we want to make sure that our information can be acted on, we’re only displaying indices that can be invested in at low cost, using index funds or ETFs. I hope that the 2025 DFO Financial Yearbook will help you understand certain facts better, so that you find the confidence to establish a sensible strategy and then stay the course.
We will always be at your disposal if you’re looking for an investment partner or sounding board!
Yours truly,
Mario Becker
CEO
