In the 2025 edition of his annual letter to investors, titled “The democratisation of investing,” Blackrock chairman Larry Fink suggested that the “classic 60/40 portfolio may no longer fully represent true diversification.” Instead, “the future standard portfolio may look more like 50/30/20--stocks, bonds and private assets such as real estate, infrastructure and private credit.”
Diversification may come at the cost of liquidity
“This model is not for everyone,” said Vincent Juvyns, chief investment strategist--Belgium at ING, “as the 20% that Fink refers to is quite illiquid.” For Juvyns, the 50/30/20 portfolio may improve the return/risk relationship in the long run--but this comes at the expense of liquidity.
“Fink’s proposal does not go far enough,” stated John Plassard, investment specialist and director at Mirabaud. He explained that beyond equities, bonds and alternatives, Mirabaud proposes hedge funds (another form of alternative investments), gold and “liquidity products.” The latter, which could include products such as money market funds, for instance, has reemerged as an asset given higher interest rates. “Berkshire Hathaway is living proof of the relevance of high-liquidity strategies, given its record exposure to US short-term treasuries,” he said. Plassard added that the Swiss franc is also a conviction and a hedge--like gold, it occupies a safe-haven status. It’s a useful feature against market turbulence and unpredictable remarks from political figures, such as those from US president Donald Trump.
(Source: Esna)
Juvyns and Plassard both stressed that the current context-- the speed of changes, the volume of information, multiplying geopolitical risks--necessitates rapid adaptation. Active management, therefore, is favoured over passive management. Plassard contrasted the current market environment with the environment in 2024. Last year, he argued, “one could have simply held an S&P 500 ETF quoted in dollars, benefiting from both the S&P 500’s gain and the rising dollar.”
Juvyns observed that one key benefit of alternatives--something that was especially relevant in 2022 and remains partly applicable to the current US market--is their “fundamental” decorrelation from traditional assets when both bond and stock markets are under pressure. Whilst illiquid alternative funds may appear to show less volatility on paper due to less frequent valuations, they are not immune to volatility, which may bite at the time of a company exit. That being said, he thinks that alternatives do make sense in portfolios, particularly in environments where traditional fixed-income assets are more volatile than what is normally observed.
Navigating alternative asset investing
Juvyns, in addition, sees the trend towards democratisation in alternative products such as the European long-term investment funds (Eltifs) as a positive development as it makes these assets more accessible to a broader audience. Furthermore, he considers the emergence of secondaries (particularly in private credit and private equity) as an appropriate tool to improve the liquidity of alternatives and tackle one of their perceived weaknesses.
Alternative assets are not all the same. Juvyns suggested that they can be broadly categorised as “income-generating” (like infrastructure or real estate) or “return-enhancing” (like private equity or private credit). Even within traditional diversified funds, certain assets like commodities, gold or listed real estate (Reits) can function as alternatives, helping to hedge against increased correlation between traditional assets.
Whilst an Eltif can invest in a broad range of private assets, Juvyns noted that its structure is valuable as it demonstrates how less liquid, less transparent assets can be made relatively accessible and transparent to investors. The Eltif framework, he said, enables a focus on specific societal needs (like financing SMEs, defence, energy transition or infrastructure). It allows European savings to be channelled into these crucial areas or other sectors as demand arises.
Whether a retail investor buys an alternative investment fund through an internet platform, a private banker or a fund-of-funds, Alfi chairperson Goy believes that European rules for transparency on cost and individual investments ensure that investors are sufficiently informed.
Orlando Bravo, managing partner of the private equity firm Thoma Bravo, recently expressed concerns that poorly performing assets may find their way into funds aimed at retail investors. Asked about this risk, Goy replied, “For sure, investment returns are the first element that investors will consider and which will guide their choices. When I look at what the European Union is doing in general, whether it’s the Ucits or the AIFM directives or on Eltifs, the absolute priority is always to protect investors. Are these rules sufficient in my view? There is a consensus in the European Union that the answer is ‘yes.’ Today, I have no indication that European regulations are insufficient to protect investors’ interests.”
Accommodative Luxembourg toolbox
For Goy, Luxembourg offers the legal and operational flexibility needed to design portfolios aligned with diverse risk/return objectives. Luxembourg’s toolbox includes Ucits, alternative investment funds fall-ing under the AIFM directive and Raifs (reserved alternative investment funds), among others, “enabling the development of tailored strategies, ranging from traditional allocations to innovative combinations including real assets and private markets.” Consequently, such a framework supports multi-asset strategies combining public and private exposures under a single structure, he said, “with efficient operating models and strong regulatory clarity.”
From a fund structuring perspective, Juvyns noted that integrating illiquid alternatives into traditional, open-ended liquid funds (like Luxembourg Sicavs) is “relatively complex” and even inappropriate. The preferred approach, he said, would be to structure client portfolios with a core of liquid assets (e.g., 70-80% in a Sicav) and a distinct, “satellite” allocation to alternatives (e.g., 20%) using dedicated structures like Eltifs that can accommodate different liquidity characteristics.
Whether Ucits funds should become more flexible to accommodate investments in private assets is an open question for Goy. This could involve revisiting the rules for the 10% of a portfolio sometimes referred to as the “bin ratio” or “other ratio,” which is not required to meet all standard eligibility criteria.
Retail as a relay for institutional investors?
Juvyns admitted that Blackrock’s proposal for a 50/30/20 model is most likely commercially driven. He pointed out, however, that the intersection of commercial and societal needs--particularly those concerning long-term investment--is growing. Significant requirements exist for infrastructure, the energy transition, and supporting small and medium-sized businesses, yet these sectors face challenges in securing capital.
At the same time, the populations of many countries, particularly those in Europe, have excess savings. Legislators recognise that institutional investors alone cannot fully meet the real economy’s financing needs, emphasising the importance of directing public savings towards these critical areas. Juvyns suggested that entities like Blackrock, whilst driven by economic interests, could serve as valuable intermediaries in this process.
Plassard remarked that integrating private assets--which are seen as potentially more remunerative and riskier--can compensate for the reduced effectiveness of the 60/40 model. The 50/30/20 model introduces significant regulatory and operational challenges related to reporting, transparency, frequency of valuations, liquidity control, risk management, and governance and education for retail investors. In addition, the 50/30/20 model also requires promoters to ensure that retail investors are adequately educated about the characteristics of the products, Plassard argued.
That being said, “it is up to each investor to decide for themselves which investment ratio suits them,” said Goy. He stressed that young investors will likely be less risk averse than retirees, but “a 26-year-old could also be very prudent and express the wish not to have any exposure to private markets.”
It shouldn’t be all about returns
Beyond investment performance, said Juvyns, there is a significant societal dimension to channelling capital into alternative assets given the pressure on government finances. The effort to mobilise long-term savings--potentially including those from households--in order to finance the “real economy” and support infrastructure, the energy transition and SMEs is necessary.
Juvyns highlighted the European Fund for Strategic Investment (EFSI), also called the Juncker Plan, as a successful example of a public-private partnership (PPP) designed to direct investment towards economic development. As part of this plan, the EFSI mobilised more than €500bn in investments for infrastructure, innovation and SMEs, according to the European Investment Bank Group and the European Commission. “The dream in the coming years would be to have this type of vehicle accessible to the general public, meaning that the general public can also be an actor in changing the economy,” said Juvyns. PPP vehicles could invest, for instance, in defence or infrastructure.
This article was written for the Alternative investments supplement of the July 2025 edition of Paperjam, published on 13 June. The magazine's content is produced exclusively for the magazine. It is published on the site to contribute to the full Paperjam archive. Click this link to subscribe to the magazine.
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