The View From Apollo
Beyond 60/40: Private Assets in an Era of High Public Valuations
Mar 10, 2025
Matt O’Mara, a partner at Apollo and co-head of Apollo Aligned Alternatives, shares insights on navigating the current economic landscape. He discusses the challenges posed by high public market valuations and how they impact traditional investment strategies, particularly the 60/40 portfolio. O'Mara argues for a strategic shift towards private markets for better diversification and returns. The conversation also touches on the implications of declining globalization, emphasizing how these changes could affect future investment dynamics.
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Quick takeaways
- High public asset valuations, inflation, and rising interest rates pose challenges for traditional 60/40 portfolios, urging a reevaluation of investor strategies.
- Shifting investments towards private markets may enhance risk-adjusted returns and mitigate inflation risks amid current economic uncertainties.
Deep dives
Challenges for Traditional Portfolios
High valuations in public markets are raising concerns around traditional 60-40 portfolios, which allocate 60% to equities and 40% to bonds. The S&P 500 has seen significant gains, but with valuations now at historic highs, there are doubts about the ability of public equities to maintain these returns in the coming years. Historical data suggests that elevated forward price-earnings ratios correlate with lower expected returns, indicating a potential shift in market dynamics. This brings to the forefront the question of whether investors are being adequately compensated for the risks associated with current valuations.
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