Why Wall Street's biggest private-markets house wants you to rebalance
The case for ditching 60/40 is more convincing than the case for what comes next
Apollo Global Management, one of the world’s largest alternative-asset managers, has published a client note arguing that conventional 60/40 portfolios are riskier than they look -- and that private markets are the fix. The report, written by the firm’s global wealth strategist, frames its case as nine diagnostic questions. The underlying message, though, is straightforward: public markets have grown both pricier and more correlated, and Apollo would like investors to hold more of what it sells.
Some of the report’s evidence is hard to dismiss. The correlation between American shares and the Bloomberg US Aggregate Bond index, just 0.13 over the past 25 years, has risen to 0.66 since 2022, undermining the basic logic of stock-bond diversification. Index overlap is real, too: the S&P 500, the Nasdaq Composite and the MSCI World index now share nearly identical top holdings, meaning an investor who holds all three may simply be tripling a bet on a handful of technology giants. And the report’s point about passive drift is well made: years of strong equity returns have nudged many 60/40 portfolios towards 77/23 without anyone deciding to take on more risk.
The valuation argument is plausible but more contestable. Apollo notes that the equity risk premium, though near its long-run average, sits well below its 20-year norm, and that credit spreads are near multi-decade tights. Fair enough -- but “spreads are tight” has been a refrain among credit strategists for several years now, with limited predictive power for when, or whether, they widen. Readers should treat this as a description of current pricing, not a forecast.
What the report does not dwell on is the cost of its own prescription. Private markets are illiquid by design; investors give up daily pricing and ready access to capital in exchange for an illiquidity premium that is not guaranteed. Fees are typically higher than for public funds. And manager selection, which Apollo itself highlights as critical -- citing a 30-percentage-point gap between top- and bottom-decile private-equity managers, against just two points in public equities -- is a double-edged argument. It implies that getting it wrong in private markets is far costlier than getting it wrong in an index fund, not merely that getting it right pays more.
There is also an obvious point worth stating plainly: this is marketing literature from a firm whose revenue depends on growing private-markets allocations, not independent research. The data points are real and mostly verifiable, but the framing -- nine “takeaways,” a confident tone about timing being favourable now -- serves Apollo’s commercial interest as much as the reader’s.
None of which makes the underlying diagnosis wrong. Diversification within public markets probably has weakened, and many portfolios likely have drifted further into equities than their owners realise. The sensible response is to take the data seriously while treating the prescription -- more private markets, ideally through Apollo -- with the scepticism due any pitch from the firm offering the cure.
