Is your portfolio built for today’s markets, or still relying on yesterday’s formulas? The era of relying solely on shares and bonds has passed.
For investors serious about securing long-term, multi-generational wealth, the smartest approach now means looking beyond the old formulas.
For decades, the traditional 60/40 portfolio (60% shares, 40% bonds) was the gold standard. But in a world of low interest rates, slowing property markets, and volatile equities, yesterday’s approach does not guarantee tomorrow’s success. That is why today’s smart investors look beyond shares and bonds, toward alternatives like private credit, private equity, infrastructure, hedge funds and real assets for modern, resilient portfolios.
The end of an investing era
The old 60/40 mix worked well in an environment of falling interest rates and predictable growth. Bonds delivered reliable income and acted as a safety net when shares stumbled.
But times have changed.
- Global interest rates are low, limiting the potential gains from bonds.
- Equities remain inherently volatile, influenced by human emotion as well as political, economic, and unexpected global events, which can lead to significant and prolonged periods of loss.
- Property, once a dependable growth engine, now faces structural challenges and is illiquid, tying up capital and limiting flexibility. It also tends to drop in value when equity markets fall.
For example, in 2022 traditional 60/40 portfolios experienced declines averaging 17% depending on the specific assets held, raising new questions about resilience in today’s markets (Source: The Financial Times ‘Battered 60-40 portfolios face another challenging year’ Jan 2023).
In this climate, the old model looks less like a safety net and more like a vulnerability. Investors building or managing significant wealth need a new approach.
Making sense of Alternatives (without the jargon)
“Alternatives” is a broad term, but the concept is simple: assets that behave differently to traditional shares and bonds. When designed well, they add balance and resilience to a portfolio.
Our focus is on liquid alternatives – strategies that aim to protect capital as much as generate returns, often hedging against market downside. While these are often grouped under “hedge funds”, not all hedge funds are equal – manager skill is crucial.
We generally invest in managers focussed on the following strategies:
- Long-biased: Buy businesses they like, sometimes using cash or options to reduce risk. Some focus on undervalued “value” opportunities.
- Long/short equity: Buy companies they like and sell short those they don’t. Can reduce downside risk while outperforming the market if executed well.
- Market neutral: Balance long and short positions to eliminate market exposure. The best managers achieve market-like returns with less volatility.
- Specialist trading strategies: Niche approaches like commodity trading or merger arbitrage, aiming for trades where potential gains outweigh losses.
- Private credit: Non-bank lending (mortgages, corporate loans) offering income and diversification, often with more flexible liquidity than in the past.
- Private equity: Invest directly in private companies. Offers growth potential but carries similar equity risk; lower volatility is often an illusion of less frequent valuation.
These can be used either as replacements for traditional assets, or powerful complements. By working with skilled managers, blending them carefully can reduce volatility, smooth out returns, and create portfolios built to endure. Alternatives also offer access to new economic drivers, often with lower correlation to traditional markets – a critical benefit during periods of market stress.
What a modern $1m+ portfolio looks like
For investors with $1m or more, protecting wealth across generations is just as important as growing it. Relying solely on shares, bonds, and property often leaves portfolios exposed to the same risks at the same time.
Modern portfolios look different, they:
- balance traditional assets with a range of alternatives.
- expose clients to different economic drivers, reducing reliance on any single market.
- tailor strategies to personal goals, whether that is stable income, capital preservation, or multi-generational growth.
Alternatives are no longer “alternative”. They’re essential to future-proofing wealth.
Building a portfolio that lasts generations
At Saxe Coburg, we believe your portfolio deserves more than yesterday’s playbook. For over 30 years, we’ve guided Kiwi investors through market cycles, leveraging these very strategies to strengthen resilience and growth. For some clients, it’s about low-volatility alternatives for peace of mind. For others, it’s balancing ambitious growth with resilient capital protection. Our process is collaborative and consultative, ensuring every portfolio is built for durability, tailored to your values, and designed to protect and grow wealth for decades to come.
The 60/40 portfolio had its time, but the world has moved on. For investors serious about building enduring wealth, the real question isn’t if to include alternatives, but how.
Get in touch to talk about how we can help you create a portfolio for the next generation and explore how life beyond 60/40 could work for you.