Retirement Solutions | Investment Insight
July 24, 2022
How Alternatives Can Address Your 60/40 Portfolio Blues
![](/adobe/dynamicmedia/deliver/dm-aid--3ad0801c-e552-416f-a475-d57ab86a48f9/apollo-web-insights-artwork-why-alts-white-paper-730x375.jpg?quality=85&preferwebp=true)
Individual investors have long been told that a diversified portfolio of public equities and bonds is the key to a successful retirement plan. While that held true for a long time—the mantra is now being challenged.
Key Takeaways
- The end of a 14-year-long period of monetary expansion, a declining number of publicly traded companies, increased concentration of risk, rising correlations, stiff competition, and scarcity of opportunities for excess returns have all coalesced to diminish the opportunity set for investors in public markets.
- How can investors address this challenge? As private markets continue to grow, we believe that investors should rethink their strategic asset allocation frameworks to add or increase the use of alternatives in their portfolios to curb volatility and seek to enhance potential risk-adjusted returns.
- We define “alternatives” as simply an alternative to publicly traded stocks and bonds that seeks excess returns per unit of risk at every point along the risk-reward spectrum, from investment-grade credit to equity.
- Seen through that prism, we believe that it becomes clear that investors can explore the risk spectrum in private markets similarly to public markets. A key differentiating element is liquidity. We believe that investors who can forgo some level of liquidity stand to benefit from the opportunity in alternatives.
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![The Search for Risk Premium with Apollo Strategist Alex Wright](/content/dam/apolloaem/images/insights/view-from-apollo/View-from-Apollo-Podcast.png)
Investment Insight | View from Apollo
The Search for Risk Premium with Apollo Strategist Alex Wright
In a new episode of The View from Apollo podcast, Apollo Chief Economist Torsten Slok speaks with Alex Wright, Global Wealth Strategist in Apollo’s Client and Product Solutions Group, about their views on where to find attractive risk premia at a time of elevated interest rates and lofty public market valuations. This episode also tackles a top-of-mind question: Is the private credit market growing too fast?
![Mid-Year Credit Outlook: Divergence to Persist through 2024](/content/dam/apolloaem/images/insights/2024/mid-year-credit-paper-blurbs.jpg)
The buoyant demand for corporate debt that propped up primary markets this year came alongside pockets of distress in the riskier parts of the market. We expect this divergence to persist through 2024. In this outlook, we’ll explore the bifurcation in the market, investment themes—from AI to elections—in opportunistic credit, the vanishing liquidity premium in investment grade debt, and the relative value of BDC’s unsecured debt.
![2024 Mid-Year Outlook: An Unstable Economic Equilibrium](/content/dam/apolloaem/images/insights/2024/2024-mid-year-outlook-an-unstable-economic-equilibrium.png)
While the Fed’s rate hikes have reigned in growth, especially among over-levered consumers, corporates, and banks, the easing of financial conditions since the “Fed pivot” in December continues to offset the effect of higher rates. For the rest of 2024, we expect economic growth to be higher than consensus and inflation to stay above the Fed’s target. We see no Fed cuts in 2024.