It served investors well in an era of falling interest rates and predictable monetary policy. But today’s investment landscape looks very different. It’s shaped by volatility, inflation, geopolitical tensions and the growing realisation that the old rulebook might not cut it anymore.
In his latest annual letter, Larry Fink, CEO of BlackRock, declared that the traditional 60/40 model “may no longer fully represent true diversification.”
Instead, he advocates for a new 50/30/20 framework, which allocates 50% of a portfolio to equities, 30% to bonds and 20% to alternatives such as infrastructure and real estate.
This shift isn’t simply a passing suggestion; it reflects growing consensus across the industry that conventional portfolios are no longer sufficient to weather today’s market realities.
Real assets: resilience in uncertain times
Real assets offer a few big advantages:
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- Steady income: Many infrastructure projects and commercial property leases are tied to inflation, providing reliable, often contractual, inflation-linked cash flows.
- Lower volatility: Unlike equities, which are prone to sharp swings, real assets tend to be more stable.
- Diversification: Real assets often behave differently than equities or bonds. Their low correlation makes them powerful tools to smooth out a portfolio’s ride.
Amid recent market turbulence, alternative investment companies and funds investing in real assets have provided some protection. For example, real estate investment trusts (REITs) investing in healthcare and student accommodation have held up well, helped by strong demand and increased M&A activity.
Higher-yield opportunities
Infrastructure investment companies, meanwhile, are yielding an average of 7.8%, according to Deutsche Numis – significantly more than many traditional income sources.
There is also a macroeconomic tailwind at play: if we see interest rate cuts, we could be lining up for a rally in alternative and real assets. This is because cash and Government bond yields would be lower, making infrastructure and real estate even more compelling for income-seeking investors.
Enhancing risk-adjusted returns
Recent analysis looked at rebalancing a traditional 60/40 portfolio of equities and bonds by adding 10% of different alternative assets. Over the past 12 months, every type of alternative asset, with the exception of oil, would have resulted in better returns for investors and lower volatility.
As my colleague Matthew Norris, director of real estate securities pointed out recently: “There’s an old saying: ‘In uncertain times, buy land, gold, and ammo.’ Well, March and April have delivered a modern twist on that survivalist mantra.
“Gold has done what it always does in turmoil – quietly outperformed as investors have sought safety. But the other standout? UK property. Specifically, next-generation real estate, reminding us of its diversification benefits.”
Time to rethink diversification
The investment world has changed. The old 60/40 model served us well, but it was built for a different era. Infrastructure and property are no longer niche – they’re becoming mainstream must-haves for investors seeking income, stability, and long-term growth.
By giving real assets a larger role in your portfolio, you’re not just diversifying your income, you’re building a strategy that’s better aligned with modern risks and future opportunities.
Cameron Gardner is head of distribution at Gravis
Important information:
No information contained in this article should be construed as providing financial, investment or other professional advice and should not be considered as a recommendation, invitation, or inducement to subscribe for, dispose of or purchase any such securities. Capital at risk. Past performance is not a guide to future performance.
