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The 60/40 allocation model for investing has taken some hits since the Fed began raising rates over two years ago. 2022 saw a sea of red ink for liquid strategies – both the “60” and the “40” – with improved returns last year and so far in 2024.
Sophisticated institutional investors long ago adopted the modified 60/40 which includes an allocation for alternatives. Is it 40/40/20? Every situation is different. But illiquid assets now have a permanent place in many portfolios thanks to their valuation and price stability through a variety of economic and market cycles.
Private credit has become a core to an alts allocation. When rates rise, it’s a natural hedge to fixed income exposure. When rates fall, it retains a consistent premium to public credit. Amid rate volatility, it produces a steady income stream with minimal disruption from headline risks...
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