BlackRock is telling financial advisors to move away from the traditional 60/40 stock/bond portfolio and to mix in some private equity, according to news reports.
The company believes that allocating up to 20% in private markets would result in better outcomes, Martin Small, head of U.S. wealth advisory, said last week at BlackRock’s Investor Day conference, according to FA-IQ sister publication FundFire.
“Our ambition is to move the industry from a public markets, pre-tax returns measured 60/40 portfolio to a 50/30/20, digitally enabled portfolio that blends 80% public and 20% private markets,” FundFire reports.
BlackRock offers a variety of products that would give investors access to private markets, including private equity and private credit, the publication writes, citing Small.
However, none of BlackRock’s investment offerings or models come with the 50/30/20 allocation Small described, a spokesperson tells FundFire.
That said, Small believes that the future is customized portfolios.
“The portfolios of the future are personalized, one-size-fits-one for households,” he said, according to the publication.
BlackRock is far from alone among industry giants shaking up the old 60/40 standard. Morgan Stanley Wealth Management recommends that clients allocate 15% to 20% of their portfolios to alternatives such as commodities, real estate, infrastructure and hedge funds, FundFire reports.
That's because the 60/40 portfolio is currently challenged by a lack of “meaningful” real income from bonds, and Treasurys are priced in such a way that they “jeopardize their role as a wealth preservation asset” when faced with inflation, the firm’s investment office chief, Lisa Shalett, told FundFire.
Wells Fargo likewise believes investors need to look beyond the 60/40 portfolio and consider adding high-yield and emerging markets bonds or global equity exposure as well as commodities and alternative investments, Tracie McMillion, head of global allocation strategy at the Wells Fargo Investment Institute, told FundFire.
Last month, meanwhile, Vanguard expanded access to private equity investing to accredited investors and what it terms as “qualified purchasers” — typically, investors with $5 million or more in liquid assets, as reported.
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