For decades, the 60:40 portfolio – 60% equities and 40% bonds – was the cornerstone of most investors. Yet, the traditional model is facing significant headwinds. Changing macroeconomic conditions, inflation uncertainty, and shifting equity-bond correlations have all questioned the reliability of this approach. In this context, alternative investments are gaining attention as an appealing complement to traditional strategies.
Rethinking diversification: the rise of alternatives
Alternatives are not a monolith – they include a diverse spectrum of investment types that may behave differently from traditional asset classes. Each type can serve a distinct role:
- Private equity targets high-growth companies, often inaccessible through public markets.
- Private credit may offer stable income through direct lending and bespoke financing.
- Real assets like infrastructure and real estate, can act as a hedge against inflation and contribute to portfolio diversification.
- Hedge funds, long overlooked by private investors, might offer both diversification and liquid flexibility – particularly in volatile or uncertain markets.
While private equity and credit typically require long-term capital commitments, hedge funds can offer more liquid exposure and may respond more dynamically to changing market environments. A carefully constructed allocation across these segments could support improved portfolio resilience over time.
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