BlackRock, the world’s largest asset manager, sent shockwaves through Wall Street with a new report that the average investor might have overlooked – as many financial pundits already have.
BlackRock’s announcement advised its wealthiest clients to move money into “alternatives.”
The firm even declared that “a 50/30/20 portfolio is the new 60/40.”
Analytics predict this decree may herald the end of the traditional portfolio mix.
[Think you can’t afford to invest in art? Think again. Learn more at Masterworks.]
Now, Wall Street is in an uproar, as including a 20% allocation to alternatives represents a sea change from the previous 200-plus years of recommending a 60/40 model (60% stocks/40% bonds).
Related: Learn more about alternative investments
And now, a 20% allocation to the investments that it pulls hefty fees from (trillions of dollars) could be moving off-Wall Street.
Where the smart money is moving
With all the uncertainties piling up for stocks (high valuations, recession risks, the “Magnificent 7” tech stock concentration, etc.) and bonds (elevated inflation, rising rates, current 3-year bear market, etc.), BlackRock says it’s crucial to add diversification via alternative assets.
Related: Learn more about how investing in art could hedge against inflation
The reason: Alternatives have shown the ability to increase returns, lower volatility, and reduce correlation in a diversified portfolio.
So, where’s the freed-up 20% going?
Well, a good portion could be headed for a little-known market that’s hard to get into.
BlackRock’s CEO Larry Fink, who has been called the most powerful person on Wall Street, put his stamp of approval on this rare asset, by saying, “[One of the] greatest stores of wealth internationally today is contemporary art. … I mean that as a serious asset class.”
With new reports like Blackrock’s changing the landscape of finance, many investors are hoping diversification now means accessing a wider range of options than ever before.
This article originally appeared on Masterworks.com and was syndicated by MediaFeed.org.
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