Retirement Solutions | Investment Insight
July 24, 2022
How Alternatives Can Address Your 60/40 Portfolio Blues
Individual investors have long been told that a diversified portfolio of public equities and bonds is the key to a successful retirement plan. While that held true for a long time—the mantra is now being challenged.
Key Takeaways
- The end of a 14-year-long period of monetary expansion, a declining number of publicly traded companies, increased concentration of risk, rising correlations, stiff competition, and scarcity of opportunities for excess returns have all coalesced to diminish the opportunity set for investors in public markets.
- How can investors address this challenge? As private markets continue to grow, we believe that investors should rethink their strategic asset allocation frameworks to add or increase the use of alternatives in their portfolios to curb volatility and seek to enhance potential risk-adjusted returns.
- We define “alternatives” as simply an alternative to publicly traded stocks and bonds that seeks excess returns per unit of risk at every point along the risk-reward spectrum, from investment-grade credit to equity.
- Seen through that prism, we believe that it becomes clear that investors can explore the risk spectrum in private markets similarly to public markets. A key differentiating element is liquidity. We believe that investors who can forgo some level of liquidity stand to benefit from the opportunity in alternatives.
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In conversation with David Rubenstein at the Economic Club of Washington, D.C., CEO Marc Rowan discusses why, amid a growing retirement crisis, investors need to re-evaluate their understanding of private markets. Much like public markets, investments in the private markets can be either safe or risky; the main difference between public and private is liquidity, not risk.
In this article, James Vanek, Partner and Co-Head of Global Performing Credit at Apollo, analyzes cyclical and secular trends putting upward pressure on interest rates, and discusses how credit market participants should be thinking about an environment in which rates remain elevated for the foreseeable future.
Equity | Investment Insight
Building Resilience: Selecting the Right Assets for an Alternatives Portfolio
In this white paper we discuss how alternative investments can be used to help mitigate portfolio volatility, and how investors can make portfolios more resilient by focusing on factors such as cash-flow generation and valuation.