Beyond the 60/40: adding private assets to portfolios

Private assets, long the preserve of institutional investors and high net worth individuals, are increasingly on the wishlists of wholesale and retail investors. Not only do they hold the promise of greater diversification in a world that is increasingly too complicated for a simple 60/40 allocation, but recent performance and growing ease of access are also increasing their allure.

However, it’s not as simple as just starting to allocate capital to private assets, there are some important considerations to take into account first - such as liquidity needs and investment horizons – before financial advisors and other intermediaries can start integrating private assets into their clients’ portfolios in a way that is both relevant and efficient.

Having grown steadily over the past 20 years from under $1 trillion at the turn of the century to nearly $15 trillion at the end of 2025, private markets AUM is now expected to almost double by 2030.¹ This growth is anticipated despite current headwinds, including: higher cost of capital due to higher average interest rates than in the previous decade; tightened credit; and slower private equity exit activity².

Wholesale and retail expected to drive much of the growth in private assets

There are two main reasons wholesale and retail investors are expected to drive most of the growth in private assets.

First, regulators around the world are gradually opening up private assets to retail investors for the first time, partly to help direct much needed capital to finance the real economy. Europe appears to be leading the way, introducing its ELTIF 2.0 regime in January 2024 which provides a way for retail and wholesale investors to tap into private markets on a large scale for the first time. The US is also forging ahead, backed by large private markets firms and President Trump. Things are also progressing in the Asia-Pacific region. The regulatory authorities in Singapore and Hong Kong released consultation papers in 2025 aiming to move their regimes closer to allowing retail access for private assets³. In Australia many retail investors are already invested in private markets through their mandatory superannuation (pension) funds and the Australian Securities Investment Commission is exploring greater access for retail, though is progressing cautiously for now highlighting knowledge gaps in the data it needs to confidently supervise private markets for retail⁴.

Secondly, there are compelling asset allocation reasons to increase exposure to private assets for wholesale and retail investors, who generally hold less private assets than institutional investors. Private asset strategies seem to be a great fit for pension and superannuation products given their extended investment horizon and low need for liquidity. Secondly, private assets have historically outperformed public markets⁵ and they offer much needed diversification for wholesale and retail investment portfolios, particularly those which follow the traditional formula of 60% equities, 40% fixed income.

To test the impact of private asset allocations on portfolio risk and return, we used vintage index data for the main private asset strategies from the past decade, de-smoothing their risk to allow for a holistic overview of portfolios’ true risk. We then tested this on a typical 60/40 Australian portfolio invested in a range of public equities, fixed income and cash.

Illustrative Australian 60/40 portfolio 
(Portfolio 1 in second graph)

Source: Natixis IM Client Solutions Group

The impact of private asset exposure on risk and return

Source: Natixis IM Client Solutions Group, Performance data quoted represents past performance and is no guarantee of future results. Performance does not reflect the effect of a sales charge. Performance would have been lower if the sales charge were included. Based on the period October 1, 2015 - September 30, 2025 in the analysis. All calculations are in AUD with Australian Dollar LIBID 1m Avg USD as the risk-free rate and using monthly data unless otherwise indicated. 

The data clearly shows that with every incremental addition of private assets, there is a corresponding decrease in risk, and increased in returns. However, while adding private assets can be beneficial to the overall composition of a portfolio, there are several caveats for investors to consider.

 Challenges for wholesale portfolios

The primary challenge is that the dispersion of returns within private assets is much wider than with publicly traded asset classes. As a result, the importance of manager selection is far greater since the gap between high and low performers is larger. Private markets are also more opaque, so it’s not as easy for investors to conduct their own due diligence on managers, or their investments.

But strategy selection isn’t the only consideration. There are four other factors to keep in mind when thinking about how to include private assets in a portfolio:

1. Limited data: While data availability from private asset providers is improving, it remains challenging to have full visibility into holdings, making it difficult to model within portfolios.
2. Valuation: Private assets are valued less frequently, making traditional risk measures such as volatility less accurate. As a result, assets can appear less risky than they actually are.
3. Illiquidity: Private assets are harder to sell than listed assets. While this comes with certain benefits, it can make rebalancing a portfolio more difficult in the short term and may affect its long term asset allocation.
4. Cash management: Managing private assets’ capital call and distributions elevate the need for an active management of cash in investors allocation

Some of these challenges are being lessened, for example illiquidity and cash management will be mitigated by new evergreen products that offer liquidity windows to their investors and avoid capital calls. While it is not without risk, for those with the expertise and risk appetite to navigate the changing landscape, adding private assets to wholesale and retail portfolios also offers significant opportunities.