BlackRock: Abandoning the traditional 60/40 portfolio, adopting a 50/30/20 approach – allocating 20% to the private equity market.

The wave of AI development is reshaping asset allocation. BlackRock executives say the rise of AI investment opportunities represents a once-in-a-century historical shift, accelerating the expansion of the private equity market and prompting investors to gradually abandon the decades-old 60/40 stock/bond portfolio framework.

In an interview with CNBC on the sidelines of the IPEM Global Conference in Paris, Fabio Osta, Managing Director of BlackRock's EMEA Wealth Business team, stated that institutional investors and high-net-worth individuals have shown "strong interest" in the private equity market. He explicitly recommended adjusting the traditional 60/40 equity/bond allocation to 50/30/20—that is, 50% equities, 30% bonds, and 20% private equity assets.

This recommendation comes against the backdrop of increasing skepticism surrounding the effectiveness of the traditional 60/40 portfolio, which is facing multiple pressures including supply shocks, inflationary pressures, and bond market volatility. Osta believes the private equity market is entering a new era of growth, becoming "more accessible, more comprehensive, and more transparent" for wealth management clients.

The global alternative asset market is expected to grow to $30 trillion by 2030.

BlackRock projects that global alternative asset management assets will grow from the current $20 trillion to $30 trillion by 2030, driven by demand from both institutional and wealth management clients.

Osta characterizes this trend as a "new continuum" of public-private market integration—investors are shifting from a clearly defined dual structure of public and private markets to an allocation model that organically integrates the two.

The 20% allocation to the private equity market will cover several "super trends" as defined by BlackRock, including AI infrastructure, energy transition, demographic changes, and urbanization.

AI has evolved from a micro-level topic to a macro-level narrative, becoming a core element of private equity portfolio allocation.

Among the many opportunities in the private equity market, Osta sees AI as the most crucial driving force . He stated that AI has evolved from a micro-industry theme a few years ago to a macro-theme with cross-regional, cross-industry, and cross-asset class impacts.

BlackRock divides AI development into three phases: we are currently in the first phase, the "infrastructure building phase" requiring large-scale innovation investment; the second phase is the technology adoption phase; and the third phase is the deep transformation phase of the next decade. "We are in the early stages of the AI building wave," Osta said.

BlackRock participated in the recent €3 billion (approximately US$3.49 billion) funding round for French AI startup Mistral, which Osta cites as a "classic case" of the opportunity to combine AI with the private equity market.

The ability to select individual stocks is crucial, but non-AI themes should not be overlooked either.

Despite the high level of attention given to AI, Osta also emphasized that energy transition, demographic changes, and urbanization are the other three major "super trends" shaping the private equity market landscape, together forming a set of opportunities for private equity allocation.

Faced with such a wide range of investment opportunities, Osta specifically emphasizes the importance of selectivity—"In this set of opportunities, the ability to select carefully is crucial." This means that although the private equity market is expanding overall, not all assets or managers can deliver the expected returns, and investors still need to carefully screen them.

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