The new diversification: a public-private play
The growing significance of private equity in the broader economy is evident in its evolving connection with public markets
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WHEN I started in the investment business more than 38 years ago, the common wisdom was simple: If you wanted to get ahead, you just had to remain invested in publicly traded stocks and bonds for the long run – and that was enough.
But as markets have evolved, we have seen a fundamental shift. Public markets, despite their accessibility, do not always offer the kind of diversification, risk management or returns that today’s investors seek.
Moreover, in the midst of widespread uncertainty, the foundational trust in the traditional 60/40 portfolio allocation (60 per cent equities, 40 per cent bonds) is being challenged at its core. For decades, investors have depended on the negative correlation between stocks and bonds to create diversified portfolios, with bonds acting as a buffer during periods of stockmarket downturns.
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