Forget 60/40. A chief investment officer shared how to split your portfolio to give you exposure to private markets, depending on your risk appetite.
Sinead Colton Grant, the chief investment officer at BNY’s wealth division, said the traditional strategy of splitting your portfolio 60% on stocks and 40% on bonds no longer yields the same returns.
“What a 60/40 portfolio would have given you in the late 90s in terms of exposure to the broader global economy — that’s giving you something a lot more narrow today,” she said.
“If you look at the changes in market structure over the last 20-plus years, they have brought us to a place where to have full exposure to the economy, you need to have exposure to private assets,” she added.
She said the number of public companies in the US has dramatically fallen in the last 30 years amid greater regulation and the growth of private credit since the financial crisis. The US had around 8,000 public companies in 1996, compared to about 4,000 in 2024, per the World Bank.
“Some of our clients will say, ‘I only want public markets,’ and that’s fine, but if a client comes to us and says, ‘What do you really recommend?’ We include private markets,” Colton Grant said.
An investor can gain exposure to private markets by accessing private equity, such as through a mutual fund or an ETF, or investing in venture capital, for example.
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Golton Grant said an investor with a moderate risk appetite should look at investing 50% in stocks, 30% in bonds, and 18 to 20% in alternative investments.
“Alternatives, for us, is private markets and hedge funds,” Colton Grant added.
For a more aggressive strategy, allocate “a little bit more” to alternatives, she said.
But the less risk you want, the more you should reduce that exposure, she said.
For the moderate risk portfolio, hedge funds would comprise about 3 to 5%, she said. Of the remaining 15%, 75% would be in private equity and venture capital, and the remaining 25% would be split between private credit and real estate, Colton Grant said.
