The traditional 60/40 portfolio is dead, long live the 60/40 portfolio.
The classic model in which 60 percent is invested in equities and 40 percent in bonds has been declared obsolete many times in recent years. Yet it stubbornly persists. In fact, it remains the benchmark against which alternative risk profiles are tested. The question is no longer whether 60/40 still works, but how the model can be adapted to a world that has become more complex.
Harry Markowitz, the father of modern portfolio theory, taught us in the nineteen fifties that combining asset classes with different patterns of movement can produce a portfolio whose total risk is smaller than the sum of its parts. This principle still forms the foundation of virtually every allocation model used today. The simplicity of this idea is both its strength and its weakness. The 60/40 portfolio reflects the belief that equities and bonds are not strongly correlated over long periods. But that assumption only holds if the conditions under which it was formulated remain stable.
The past few years have shown that this is no longer a given. Inflation, interest rate volatility, and correlated sell-offs have undermined the traditional logic. When both equities and bonds fell sharply at the same time in 2022, it became painfully clear that diversification is not automatic. Investors who believed their bond positions provided protection were left disappointed.
Diversification revisited
This does not mean that the basic principle of diversification has failed. On the contrary, its importance is only increasing. But the way diversification is achieved requires rethinking. Investors are therefore looking for more flexibility within their strategic asset allocation. The rigidity of fixed allocations feels increasingly uncomfortable. Publications on liquidity reserves, tactical overlays, and opportunistic tilts are becoming more common. Investors want agility without losing discipline.
Adaptability is becoming more important than sticking to a predetermined plan. Strategic asset allocation offered a sense of control for decades, but those certainties are fading. Markets now move faster than the annual recalibration of strategic allocation can keep up with. Research into the transition from rigid models to more flexible approaches has increased substantially. Investors are increasingly aware that rigidity can be just as risky as volatility itself.
At the same time, private markets are moving toward the core of the portfolio. What was once a niche for additional return is becoming a fully fledged building block of wealth management. Private equity, infrastructure, and private debt broaden the investable universe and help reduce concentration risk in public markets. The discussion is shifting from whether alternatives deserve a place to how they can be integrated in practice. Cash flow management, rebalancing, and governance impose new demands on investors aiming to build substantial allocations to illiquid assets. Frameworks such as 50/30/20—with 50 percent allocated to public equities, 30 percent to fixed income, and 20 percent to alternatives—are gaining popularity. They reflect the search for balance between liquidity and long-term return.
The new, moderate model portfolio
For 2026, a picture emerges of portfolios that combine simplicity with agility. 60/40 will remain a reference point, but it will increasingly be filled with low-cost index investments that free up operational space for active strategies and illiquid positions. Investors are also thinking more in terms of risk factors rather than only in asset classes. A portfolio that appears diversified on paper across equities, corporate bonds, and private equity may in reality be heavily concentrated in the economic growth factor. By using a risk-factor lens, investors can avoid unintended concentrations.
An allocation of 50 percent to private markets, as some wealth managers now advocate, is not an arbitrary choice but the result of this factor-based approach. When a portfolio is constructed from desired exposures to equity, rates, diversifiers, and alpha—and then translated into concrete investments—a substantial portion of capital may end up outside the public markets. The new moderate model portfolio, also called the new neutral, that emerges from this looks radically different from portfolios of ten years ago.
Whether this evolution will actually deliver better results remains to be seen. Complexity is no guarantee of success. There is a risk that investors take on more than they can handle or underestimate the operational challenges of illiquid investments. But what is clear is that the old certainties have disappeared. The assumption that bonds automatically provide protection when equities fall is no longer tenable. Nor is the idea that an annual strategic review is sufficient to stay on course.
The portfolio for 2026 requires investors who are willing to revisit their assumptions and adapt their structures. Not because change is a goal in itself, but because the world in which we invest is constantly changing. Resilience must be built, not assumed.
Han Dieperink is chief investment officer at Auréus Vermogensbeheer. Earlier in his career, he was chief investment officer at Rabobank and Schretlen & Co.