By Morey Stettner
Farmland, timber and other alternative assets can stabilize your portfolio when the stock market wobbles
For decades, investors have heard it’s smart to construct a 60/40 stock-bond portfolio. Investors and their financial advisers often tweak asset allocation to reflect a client’s age, risk tolerance and other factors.
Now along comes Larry Fink, chief executive of BlackRock (BLK), the world’s largest asset manager. He recently suggested replacing the traditional 60/40 model with a 50/30/20 split: 50% stocks, 30% bonds and 20% private assets (aka alternative investments).
Read: Larry Fink proposes an alternative to the 60/40 portfolio. It means more fees.
Private assets encompass a wide range of investments that do not trade on a public exchange. Examples include hedge funds, real estate, private equity, private credit and infrastructure.
For Fink, private assets offer protection from inflation along with steady, stable returns for decades. Some advisers agree.
For more than 15 years, Paul Winter has put a slice of clients’ money into two types of alternatives: commodities and non-dollar-denominated bonds. “Alternative assets always make sense in portfolios,” said Winter, a certified financial planner in Salt Lake City, Utah. “There’s always a need for diversification in a prudently managed portfolio regardless of what’s going on in the economy, political scene and geopolitical landscape.”
The case for alts grows in times like these. Amid all the tariff-driven uncertainty and global instability, investors have worried about lingering inflation as well as an economic slowdown may seek to preserve capital.
“Commodities have historically served as an effective inflation hedge,” Winter said. “And non-dollar-denominated bonds should perform well during periods of dollar weakness, whether or not that’s caused by inflation and/or slow growth.”
Read: Investors really want to believe Trump on tariffs – but the truth will hit them soon
Fink’s 50/30/20 model reflects the democratization of alternative assets. Through the 1990s and most of the 2000s, private assets were only available to institutional and other accredited investors (i.e., the ultra-wealthy). But in 2008, the SEC issued new rulings giving a wider swath of investors access to certain alternatives. This “changed the game” for advisers and their clients, says Scooter Thomas, a certified financial planner in Birmingham, Ala.
Like Winter, Thomas is a longtime fan of private assets. Recent market volatility reinforces the rationale for holding alts as a non-correlated asset class that serves as a hedge against sinking stocks. “Alternatives have improved risk-adjusted returns historically,” Thomas said. “They can give you the same market returns as 60/40 with less volatility.”
Thomas’s firm invests in real assets such as farmland, timber and reinsurance. Using a disparate mix of alternative assets mitigates risk more effectively, because each type of alt is not only non-correlated to stock indices (like the S&P 500 SPX) but also non-correlated to each other.
“With reinsurance, your 20-year return will be high and your volatility will be low because people will always have to have it,” Thomas said. “It creates a metronome to keep you afloat” amid market turbulence.
Jonathan Dane, a Pittsburgh-based certified financial planner, says that alternative assets stabilize a portfolio when markets tumble.
“What has changed in the last few months is the impact of real assets on an overall portfolio,” Dane said. “It’s having these tangible assets – like cell phone towers, tugboats, private real estate and farmland – that can provide sustainable income and consistent returns over time.”
The allure of securing a predictable income stream led BlackRock to acquire Global Infrastructure Partners in 2024. GIP runs pipelines, data centers, airports and other big infrastructure assets that promise steady returns in almost any foreseeable economic environment.
In March, Fink led a consortium that seeks to buy more than 40 ports around the world (including two key Panama Canal ports) from Hong Kong-based CK Hutchison Holdings (HK:1) for $22.8 billion. While the complex deal has hit snags, it signals Fink’s desire to lock in long-term returns from owning and operating the ports.
Advisers who see the value of alternative assets are educating clients about the benefits of diversifying their portfolio beyond stocks, bonds and cash.
Monish Verma, an adviser in Farmington Hills, Mich., says his firm hosted a dinner in March to discuss “new ideas in the alternative space” with clients. Moving some of clients’ portfolios from equities to private markets – including private credit, private equity, structured notes and real estate – can protect wealth in an uncertain world.
“We’ve been using private markets for more than a decade,” Verma said. “A lot of our clients are already wealthy when they come to us. Our goal is to keep them wealthy.”
For advisers, educating clients includes a warning about liquidity. Unlike stocks and many types of bonds that you can buy and sell easily, private assets do not serve as short-term investments. Investors must be willing to accept initial illiquidity and embrace the steady payoff of a stable long-duration investment.
Also read: As talk about taxing the rich heats up, here are 7 ways millionaires stay wealthy that can help you too
More: BlackRock’s Larry Fink compares current climate of anxiety and uncertainty to 2008 financial crisis
-Morey Stettner
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05-14-25 0805ET
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