BlackRock’s Conway: 60/40 portfolio split is no longer relevant

Firms pushing for democratisation in private markets need to ensure educating retail investors is a critical part of the journey, says the firm’s global head of alternatives.

Edwin Conway BlackRock investment alternatives retail investors
Edwin Conway, BlackRock Alternative Investors

Private wealth and retail investors will continue to migrate to private markets to improve investment outcomes and meet their needs for retirement, said BlackRock’s alternatives chief.

Speaking with affiliate title New Private Markets on the latest episode of PEI Media’s podcast series Spotlight, Edwin Conway, senior managing director and global head of BlackRock Alternative Investors, noted that wealth market participants – and, more generally, retail investors – will accelerate their move to alternatives in the coming years as the necessity for private markets exposure in their portfolios has become more prominent.

“The days of when the 60/40 portfolio split [existed] – we think those days are gone.”

Conway added that wealth clients’ exposure to alternatives stands at about 2 percent to 5 percent, although the ambition is around 20 percent. With “tremendous structural changes in the world” and the necessity to have alternatives in the portfolio, that allocation is a “huge underweight”, he noted.

“We think the allocation range of around 20 [percent] is very real, something that our clients should be doing.”

He added: “Up until the more recent years, you’ve really seen the ultra-high-net-worth individuals invest [in alternatives], but below that it’s very random… As you think about their portfolio allocations, it’s just so much harder for them to hit their retirement objectives with such a meaningful underweight.”

BlackRock is aiming to democratise access to alternatives through products such as BlackRock Credit Strategies Fund as well as its Private Investment Fund, which wraps primary, secondary and co-investment exposures for PE, Conway said.

BlackRock Alternative Investors manages some $315 billion in assets for institutional and wealth clients across a range of strategies including private equity, debt, infrastructure and hedge funds. The asset management giant identified the private wealth channel as one of its “growth accelerators”, alongside the APAC region and sustainable investments, in its investor day last year.

Conway also noted in the podcast that educating retail investors is a key part of the firm’s work.

“I think the more we can literally democratise this, make sure that the access can be there, and these exposures can be wrapped the right way, albeit while transmitting the right information… that is important.”

“There is a knowledge gap today. And these are long-dated, illiquid assets that are very complex,” said Conway.

“I think it’s incumbent upon us and all the partners we work with to ensure education is a critical part of this journey, too.”

– Toby Mitchenall contributed to this report.

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