(HedgeCo.Net) A notable trend gaining momentum in the alternative-investments space: younger investors (Millennials and Gen Z) are increasingly favouring “alternatives” over the traditional 60% stocks / 40% bonds portfolio model. A Bloomberg report found this cohort is moving capital toward pre-IPOs, private equity, real estate, and crypto, signalling a structural shift in asset-allocation philosophies. Bloomberg
What’s Changing
Historically, the 60/40 portfolio has been the orthodox blueprint — 60% invested in equities, 40% in bonds, offering modest growth and risk mitigation. But younger high?net?worth (HNW) and ultra-HNW individuals are increasingly looking beyond this model, turning to alternative investments as a means to diversify, capture higher upside, and reduce correlation to public markets. This behavioural change is reshaping how wealth managers and advisors think about portfolio construction.
Drivers
Several factors underpin this shift:
- Access: Technology platforms, fractional?investment models, and alternative-fund vehicles have opened doors to asset classes previously reserved for institutions.
- Risk appetite: Younger investors often exhibit higher tolerance for illiquidity or volatility in pursuit of “growth-type” returns.
- Disbelief in traditional models: With interest rates elevated, bond yields low (by historical standards), and stock valuations high, the conventional 60/40 may feel less reliable.
- A search for diversification and new themes: Real assets, private credit, venture/PE exposures and even crypto are being integrated into portfolios as “active” choices rather than niche holdings.
Implications for Advisors & Managers
For wealth-management firms and asset managers, this trend signals a need to adapt:
- Product innovation: Structuring alternative-investment vehicles that meet younger investors’ needs (liquidity, transparency, cost-sensitivity) is becoming more pressing.
- Education & suitability: Advisors must balance the enthusiasm for ‘new vs old’ with clear communication around liquidity risks, fee structures, and exit horizons in alternative assets.
- Portfolio construction re-thinking: The conventional 60/40 model may still apply for many, but alternative allocations may rise from single-digit to more meaningful percentages across some portfolios.
- Operational readiness: Platforms, data, reporting, risk-management frameworks must evolve to support increased participation in private markets, venture, real estate and alternative credit.
Considerations & Caveats
While the shift is real and accelerating, alternative investments come with their own set of risks. Illiquidity, valuation opacity, longer time horizons, and higher fees are typical. Younger investors must understand that the “access” to alternatives doesn’t automatically mean “safer” or “easier”. Moreover, a wholesale move away from bonds and public markets could introduce unintended risks if alternatives under-perform or face structural shocks.
Bottom Line
The move by younger investors toward alternatives is less of a fad and increasingly a serious re-allocation. As the investment industry adapts, the long-standing 60/40 paradigm may evolve or become one of many planning tools — especially as alternative asset classes seek to enter the mainstream. For investors, it underscores the importance of thoughtful diversification, not just chasing novelty.