MW Larry Fink proposes an alternative to the 60/40 portfolio. It means more fees.

By Steve Goldstein

Larry Fink - who, as BlackRock's chairman and chief executive, leads the world's biggest asset manager - is touting a new long-term investment strategy in his annual letter.

"Diversification has been called the 'only free lunch.' It was the motivating idea that led Nobel Prize-winning economists like Harry Markowitz and Bill Sharpe to develop Modern Portfolio Theory, which became the foundation for the standard portfolio of roughly 60% stocks and 40% bonds," Fink said in this year's letter.

"The future standard portfolio may look more like 50/30/20 - stocks, bonds, and private assets like real estate, infrastructure, and private credit," he said.

BlackRock has been bulking up on private assets, agreeing last year to buy HPS Investment Partners, a private credit investor, for $14 billion after buying Global Infrastructure Partners for $12.5 billion and leading a $20 billion offer to buy Panama Ports. It's also buying Preqin, a provider of data for private markets.

BlackRock is in the early stages of offering private assets to investors. Last week, it unveiled portfolios that combine publicly traded stocks and bonds with private funds, to be sold through financial advisers.

Fink acknowledged that private assets carry greater risk, but said the alternative portfolio offers inflation protection, stability and returns.

Left unsaid was that this portfolio is a lot more expensive. Two of BlackRock's biggest funds, the iShares Core S&P 500 ETF IVV and the iShares Core U.S. Aggregate Bond ETF AGG, each have an expense ratio of 0.03%.

Compare that with a fund it sells to European investors: the iShares Listed Private Equity UCITS ETF, which has an expense ratio of 0.75%.

A quantitative-investing pioneer, Richard Ennis, who examined the performance of university endowments that have invested heavily in alternative assets, found they're more expensive.

"What you get with alts is pretty much the same as what you get with stocks and bonds. The main difference is that you pay at least 10 times more for the alts," he said.

Fink said BlackRock wants to be able to index private markets as it does assets such as the S&P 500 SPX. "With clearer, more timely data, it becomes possible to index private markets just like we do now with the S&P 500. Once that happens, private markets will be accessible, simple markets. Easy to buy. Easy to track," he said.

-Steve Goldstein

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March 31, 2025 07:20 ET (11:20 GMT)

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