The View From Apollo Beyond 60/40: Private Assets in an Era of High Public Valuations
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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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Market Conditions and Portfolio Risks
- High valuations in public markets, robust economic activity, and potential interest rate hikes pose challenges for investors.
- These conditions create an environment similar to 2022, a difficult year for traditional portfolios.
Equity Valuations and Concentration Risks
- Public equity valuations are near historic highs, with the CAPE ratio significantly above its long-term average.
- This, coupled with high market concentration, raises concerns about future returns and diversification.
Risk Premiums and Spreads
- The equity risk premium has fallen into negative territory, indicating investors are paying to take risks.
- Similarly, tight credit spreads in public credit markets offer limited room for error.
