Q: The year began with markets expecting two rate cuts, but inflation has stayed persistent. We have already seen one hike, with another expected in December. The Bloomberg US Aggregate fell 3.5% in the third quarter, its steepest quarterly drop since 2022, and with investment-grade spreads near historical tights, bond investors are being paid mostly for rate sensitivity rather than credit risk. Alex, as you travel and speak with advisors and investors around the world, how are they thinking about this environment?

Alex Wright, Partner and Global Wealth Strategist: We start with the macro backdrop. What we are seeing is nominal GDP moving up to the right pretty swiftly, though narrowly focused in terms of what is driving it: AI spend and the high-end consumer. But nonetheless, the economy looks robust. Strong economy, expensive liquid assets. That echoes the spread dynamics you described, and also the negative impact on longer-duration assets when rates move higher. The other macro drivers are worth noting as well: unemployment seems to be in check, but inflation is high, driven by tariffs, energy issues and geopolitical realities. Higher for longer to address enhanced inflation looks like the reality. When we turn to market discussion, what I would say is that IT has become something close to religion in public equity. You have to have some faith that these valuation levels are going to hold, that the free cash flow assumptions for the hyperscalers will be met. What that means practically is that it may be a good time to tuck in and do some rebalancing. Public fixed income, as we discussed, is very tight by way of spread to Treasuries, so that may not be the angle you want to take.

Q: When you speak to clients about this, where are their heads? How are they thinking about it?

Alex Wright, Partner and Global Wealth Strategist: I try not to fight the religion in that context. What I highlight instead is a truism I find myself sharing in almost every meeting: after three years of markets moving up and to the right, most investors are somewhat overexposed from an allocation standpoint. If you started with a 60/40 and left it alone for three years, you are now skewing up toward 72% equities, maybe higher. That might be a little rich for many people. The challenge advisors face is that their clients do not want to incur capital gains tax and are still on the ride. As fiduciaries, advisors understand that rebalancing is what should be happening, and you do see it starting to occur. We heard today in meetings with a large wirehouse that they have actually reduced equity exposure going back to October for exactly that reason. It is coming. It feels prudent, and we will have to see how it plays through.

Q: Given these realities, what role does the bond sleeve actually play right now?

Chris Lvoff, Managing Director in Apollo Portfolio Solutions: First and foremost, bonds are there to generate income. As Alex mentioned, higher interest rates mean more yield and more income, all else equal. The challenge is that the uncertainty we are all facing, combined with the market drift that has benefited equities over bonds, has shifted the risk profile. If rates are higher, there is more uncertainty and more volatility. And interest rates impact everything: every investment decision depends on the level of base rates, on where government bond yields are. As you build risk up from there, you are adding spread for investment grade, and as Alex noted, those spreads are very tight today. As you move further out on the risk curve toward non-investment grade and more opportunistic credit and equities, you are building on top of those base rates. The risk-return profile has shifted and is expected to stay elevated from that uncertainty dynamic.

Q: What role do private markets play in managing some of this dynamic?

Alex Wright, Partner and Global Wealth Strategist: I want to zoom out for a moment first. You need to review your current portfolio holdings through the lens of where the risk-free rate is, and ask whether you are getting a risk premium all across the curve, whether that be investment grade, high yield, direct lending, equities, or otherwise. If the answer is no, that should be money in motion looking for a different allocation. When we then think about what private markets need to deliver, there are really four attributes: alpha over a cycle, muted volatility, diversification and expanding the investment opportunity set. On that last point, 85% of companies in the US with $100 million or more in revenue are private. Not only are public investments concentrated narrowly, they represent only about 15% of the entire investable universe.

Chris Lvoff, Managing Director in Apollo Portfolio Solutions: It is about diversification and sourcing the most efficient level of it, meaning tapping into different drivers of return that react differently to market environments. Historically, fixed income bonds have been a great diversifier. Whenever there was risk in the market, you could rely on Treasuries to rally and offset what was happening elsewhere. That is harder to depend on now. When we think about private markets and the ability to tap into what we call an origination premium, being able to construct an investment through bilateral negotiation and the creation of covenants that protect you as a lender, you generate excess yield or excess spread associated with that. As you move into more opportunistic or hybrid or equity-like investments, that same idea of origination premium applies, plus you have the opportunity to influence the outcome of the portfolio company or investment. That active decision-making becomes a really important driver of return in private markets, where you have many more levers to pull.

Q: For decades, the 60/40 portfolio worked because bonds cushioned stock declines. In 2022, stocks and bonds fell together. The 36-month correlation between US stocks and bonds peaked near 0.7 in 2024, the highest since 1980, and still sits around 0.5. The hedge portfolios have counted on seems less reliable than it used to be. How do you think about the 60/40 now, and how are clients thinking about it?

Alex Wright, Partner and Global Wealth Strategist: The correlation is way up. In practice, when you start to see more volatile swings in the market, it feels like considerably more than 0.5, as we saw specifically in 2022. So the question is: what else can one do? And that is where private market considerations come in. It used to be the view that public was safe and private was risky. But what if the reality is that both can be safe or risky, depending on what you are doing and how you are going about it? When we think about portfolio construction, private markets are not a bucket. They are replacement strategies. Your public equity and public fixed income books are going to give you beta. The question is what you can add or replace with private markets to drive alpha, muted volatility, diversification and an increased opportunity set. So maybe it is not a 60/40. Maybe it is more like a 50/20/30, with the alpha component driven by private equity, secondaries, diversified private market portfolios and real assets on the equity side, and by large-cap direct lending, asset-backed, real estate lending and infrastructure on the fixed income side. These are the ingredients we hand over to Chris from a portfolio optimization standpoint.

Chris Lvoff, Managing Director in Apollo Portfolio Solutions: You are almost turning the whole question on its head. The 60/40 is a construct we have inherited because it gives you a moderate level of risk: roughly 10 to 12% annualized volatility, plus or minus 10% around a positive-trending portfolio. The question is whether we can still generate the level of return people have gotten used to from public markets, while delivering that kind of alpha with a larger base of capital to deploy across different types of businesses and companies. Rather than thinking about volatility and 60/40 ratios, the better question is: how much liquidity do I really need, and can I do something more efficient with my capital so that I am generating more return per unit of risk? When you look at factor exposure and what is actually driving risk in a portfolio, you can simplify it to equity risk, interest rate risk and what is left over. That third bucket is what you want to maximize, because it is generating uncorrelated return. That is the goal: investments that are doing something different from what you can get cheaply in public or beta markets.

Q: Do advisors trust that diversification in private markets? How often do you have to reinforce that the uncorrelated return is real?

Chris Lvoff, Managing Director in Apollo Portfolio Solutions: It is an education. The way we think about private markets has evolved so much in the last few years, and there is still a misperception about what is risky versus safe, what is liquid versus illiquid. As we think about whether those sources of return are dependable over full market cycles, we can point to the empirical data, but we can also point to the change in market structure itself. The number of public companies has diminished dramatically. The number of large private companies has increased dramatically. In 2006, there were fewer than 10 unicorn companies, those with billion-dollar-plus valuations. Today, almost 20 years later, there are close to a thousand. The way companies finance themselves and grow their businesses is simply different than it was before. Being able to tap into a diversified source of private market return means being pulled into private markets. And the innovation in how you can access them has changed too: it is not just committed drawdown closed-end funds anymore. You can access private markets through open-end evergreen perpetual funds, and through exchange-traded securities and notes that provide exposure that was very hard to get previously.

Alex Wright, Partner and Global Wealth Strategist: On the trust question: manager performance in public markets is typically measured in basis points relative to index. In private markets, we are talking about hundreds of basis points of differentiation. That gets back to education, because some people say, is not all private credit the same? Does it not just pay out X%? It does not, and you are seeing significant economic dispersion now based on how portfolios were positioned coming into where we are today. We took contrarian approaches to a number of things, whether that be deep-value private equity where purchase price matters, or in credit by staying at the top of the capital structure, focusing on large-cap borrowers, and reducing software exposure. That was a contrarian call about 18 months ago. The net output is different from the market, and that dispersion is widening. Manager selection in private markets matters a great deal.

Q: The S&P 500 holds hundreds of stocks, but the 10 largest, concentrated in technology and AI, have contributed more than half of the index's return so far this year and now make up just shy of half of the index overall, more than double their weight a decade ago. The Shiller CAPE is around 40x against a 30-year average of about 29x. And some investment-grade corporate bonds currently yield more than the S&P 500's forward earnings yield. Is concentration risk sinking in with advisors and their clients?

Alex Wright, Partner and Global Wealth Strategist: A couple of observations. At this point, is the S&P 500 really an index, or is it acting more like a high-conviction tech hedge fund? This level of concentration is like nothing we have seen before. And these are fabulous companies, do not get me wrong. But the volatility is whippy: the Mag Seven was down almost 15% in the first quarter, then rallied back sharply. You are taking a roller coaster ride. Some people like roller coasters. I prefer the passenger train. Muted volatility, steady compounding. Many of our strategies, including credit strategies that are coupon-oriented and sit at the top of the capital structure, are fundamentally outpacing the Mag Seven. The advisor community does recognize the concentration risk. The challenge is that on the way up, it feels great, and people are loath to sell and take capital gains. By the time the drawdown comes, it may feel too late. That is why we have been saying throughout the year: you have had a great run, you may be a little overexposed, trim the hedges. We are not saying to exit all your equities or all your tech. But a little rebalancing goes a long way.

Q: Talk a little bit about valuation as a factor in this conversation.

Chris Lvoff, Managing Director in Apollo Portfolio Solutions: Valuation is critically important when thinking about forward-looking returns. When valuations are expensive, your earnings yield for what you are paying to get exposure is so low that it takes a long time to recoup that investment. When you look at past valuation cycles where we have been at this level, it does not portend to high forward-looking returns. That valuation overhang implies a lower equity risk premium going forward, and would imply lower allocations to public equity, particularly when we are also dealing with higher volatility and higher uncertainty. So it is pushing investors in a balanced portfolio toward rebalancing. If you were in a 60/40 that drifted to 70/30, you are now in a very different risk profile than you started with. Consider how to balance that appropriately, knowing that your equities are now volatile and highly valued, and your fixed income is volatile but at least offering higher yields than it has in some time.

Q: Skeptics would say that private equity could be just as concentrated in the same sectors and opportunities as public markets. How do you think about that, and what about other equity-like solutions such as hybrid or secondaries?

Alex Wright, Partner and Global Wealth Strategist: Growth private equity has moved materially into software over the last decade, and a lot of the attribution from those funds came from multiple expansion and cheap financing. Both of those attributes are largely gone. The result is low DPIs and muted return of capital. The financing market has also shifted: pre-2022, equity contributions to deals were around 30%. Now they are closer to 60%. That is sand in the gears of M&A activity and part of why secondaries have taken off as an exit ramp for many private equity portfolios. When we think about where the value is today, it coincides with what we have done for 36 years: deep value, purchase price matters, paying six or six-and-a-half times for companies rather than 11 or 12 times. Skewing away from software and tech is very much part of that approach. The attribution of return should come from improvements to free cash flow. Counting on multiple expansion, cheap financing, and external forces can be a bonus to the upside, but it should not be the core thesis.

Secondaries are very interesting, particularly GP continuation activities. You are getting an acceleration of DPI and cash flows because you are coming in not at the beginning but in the middle to late stage, and you are seeing those cash flows turn over. The key is what discount you are paying and what influence you can have in improving the underlying investment. On hybrid and structured equity, we really like the risk-adjusted return of preferred and convertible securities. You have a layer of insulation on the downside through the common equity, and if you do it the right way, you can achieve returns close to the average of private equity while sitting higher in the capital structure with downside protection.

Chris Lvoff, Managing Director in Apollo Portfolio Solutions: The idea of avoiding downside risk so that you are compounding at a more consistent rate is incredibly powerful over time. What we call variance drag, that downside volatility, is what destroys wealth accumulation. The appeal of hybrid is getting some upside optionality while mitigating the downside through structure, covenants and protection. You compound with less variance drag. It is the same logic as diversification: you are taking many small bets, investing in companies doing lots of different things, so that whatever the macro environment turns out to be, certain parts of your portfolio will do well and others perhaps less so, but the combination keeps the downside mitigated. With public market concentration at historic levels, the case for investing in companies with different drivers of return has never been more compelling.

Q: Equity concentration gets a lot of attention, but concentration in the bond market may be underappreciated. Treasuries are now about 46% of the Bloomberg US Aggregate, up roughly 20 percentage points in 20 years, and corporate spreads sit at some of their tightest readings in decades. At the same time, AI-related borrowing has reached more than $300 billion this year, with more than half of it being net investment-grade supply. The credit story really leans on the assumption that hyperscaler operating cash flow will more than triple from $600 billion last year to $2 trillion by 2030. Alex, what does the core bond index hold that most investors do not realize, and what does that AI borrowing mean for credit and duration?

Alex Wright, Partner and Global Wealth Strategist: The skew toward Treasuries means you are really taking on an interest rate bet rather than clipping a coupon in a credit-oriented way. And then the proliferation of capital raising from the hyperscalers, who are quickly becoming some of the largest corporate bond issuers, means that what used to be concentrated in bank paper is now starting to skew toward technology. The result is that you could wake up and find 50% or more of your portfolio exposed to the same underlying investment thesis in equities and now in your investment-grade index. Different parts of the capital structure, different volatility profiles perhaps, but all related to the same story. That comes back to: would it not be interesting to start rebalancing and using private markets to diversify away from that, depending on what you are choosing to do.

Chris Lvoff, Managing Director in Apollo Portfolio Solutions: The Bloomberg Aggregate is really the mainstay that people benchmark against when they think about the 40 in a 60/40. That index is now predominantly Treasuries, dominated by interest rate duration, and limited to investment grade. Beyond the index, there is a very interesting space in the crossover between investment grade and non-investment grade where active bond selectors spend a lot of time and where none of those investments make it into the Agg. As you move into asset-backed credit and other private market sources of financing, you are premising repayment not on a company's ability to execute its business model but on the cash flows that are collateralizing the lending. That is a very different default and risk profile from corporate bonds. It could be backed by consumer cash flows, hard assets or risk transfers. You get a meaningfully different risk and return outcome. Think also about duration: in aggregate fixed income, you are getting predominantly six years of duration right in the belly of the curve. That may not be right for every client. And for taxable investors, Treasuries are not particularly efficient. Teasing out the right duration, the right taxable versus nontaxable exposure, and the right public versus private mix is how you build a more resilient fixed income portfolio.

Q: The floating rate aspects of private direct lending also seem relevant here. How do you think about that in the current environment?

Alex Wright, Partner and Global Wealth Strategist: We have already seen base rates move up around 40 basis points north of 4%, and directionally, that feels supportive for direct lending. We have also seen spreads widen from last year, and you now have a Fed that is hiking. With floating rate, you generally make more money in that environment. That is markedly different from the last two years, when the expectation was for six cuts, then four, then a couple, and now we are having hikes instead. Directionally, we are in a much better space for floating rate going forward. That applies to asset-backed lending as well, the majority of which is floating rate. I would anticipate a shift into risk-free and a shift into floating, and some of the fixed-rate, tight-spread paper may be left behind.

Q: Looking ahead, if you were rebuilding a 60/40 for an advisor today, what would you change first, and how would you think about the private market component?

Chris Lvoff, Managing Director in Apollo Portfolio Solutions: The 60/40 exists because it solves for a moderate risk profile, roughly 10 to 12% annualized volatility. At some point in the past, you could achieve that level of return and volatility with almost 80 to 90% fixed income. As yields came down, more and more shifted into equities to generate the required return. Where we are today, I am unlikely to get the level of return from that 60/40 that I have gotten used to. I am going to have to do something different: diversify away from the technology concentration coming through in my equity portfolio, and diversify beyond investment-grade credit in my bond portfolio. Private markets can help: enhancing return, mitigating risk, accessing diversification, and opening up a much larger universe of potential investments. That means thinking beyond the public versus private distinction toward where I can get the highest return per unit of risk. How does infrastructure play into my portfolio? How do real assets play into my portfolio? Can I get different potential cash flow streams that make my portfolio more resilient and generate more consistent returns with less downside risk? Focus on downside risk and consistency of performance becomes critical, particularly at today's valuations.

Alex Wright, Partner and Global Wealth Strategist: I do not think we have a 60/40 as a general statement. Most investors have let the equity side run, and we are probably closer to a 70/30 or even more equity-heavy just given the sheer run-up over the last three years. So the first thing I would be thinking about is how to diversify that down and rebalance: get your beta from the market and source some alpha from deep value private equity, secondaries, or diversified private markets. Getting that risk factor down is important because most investors are overextended. I say that in meetings with hundreds of advisors every month, and I get a lot of nodding heads. Then I would turn to the public fixed income book, which may already be reduced, and focus on duration. Should some of that be shifted to floating rate to capture an increasing rate environment and get more income? I think that direction makes a lot of sense from where we sit today.

Note: This transcript has been edited for clarity. It does not represent a verbatim transcript of the podcast. Podcast recorded on November 4, 2026