The traditional 60:40 stock-bond portfolio has rarely looked so expensive, creating substantial challenges for investors looking for both income and diversification. Thanks to the huge amount of policy support delivered by central banks in the face of the pandemic, government bond yields sit close to record lows. As a result, government bonds don’t provide the income they once did, and there is less scope for these richly priced bonds to appreciate in a risk-off environment and shelter a portfolio. Our latest On the Minds of Investors article – Why and how to re-think the 60:40 portfolio – considers solutions to constructing a portfolio in this environment. We think that flexible fixed income strategies, real estate, infrastructure, and macro hedge funds can help solve this challenge.

A traditional 60:40 portfolio looks expensive

Blended earnings/coupon yield on a portfolio of 60% MSCI ACWI and 40% Barclays Global Aggregate