The Australian – Private markets offer refuge as the traditional 60/40 portfolio crumbles
It’s a shot across the bow. In recent weeks, short, sharp sell-offs across the largest global artificial intelligence (AI) hyperscalers have woken investors from their technology and AI-inspired slumber. In just six trading sessions, Microsoft fell 18 per cent. Meanwhile, Amazon has declined 14 per cent in eight sessions, and Google parent Alphabet has fallen 8 per cent in just four sessions. Elsewhere, Meta fell 10 per cent, and Tesla has declined almost 12 per cent in 10 trading sessions.
This article was first published in The Australian on 11 February 2026.
Not all sell-offs have been short. Zoom out and, over the last 90 days, Coinbase has slumped 48 per cent, Oracle and Atlassian have fallen 41 per cent, PayPal has dropped 39 per cent, Snowflake is 37 per cent lower, as is Roblox, while Intuit and Spotify are 32 per cent lower, Palantir and Shopify have declined 29 per cent, and Cloudflare, CrowdStrike and Workday are 27-29 per cent lower.
Now, to be frank, not many retirees have too much of their nest egg wrapped up in these companies, but the fact that stocks can fall so far and so fast should remind investors to consider what broader but rapid declines could mean for their lifestyle and retirement.
Aside from the idiosyncratic explanations for the declines in stock prices, such as investor patience being tested by Google’s projected capital expenditure of US$185 billion (A$261 billion) on data centres, servers and advanced chip technology, and Morgan Stanley’s concerns about Google’s return on invested capital, there’s a bigger story under way.
And that story should prompt all investors to reconsider what’s in their 2026 portfolios.
First, the last two decades have been relatively smooth for investors. Low inflation, falling interest rates, and a global rules-based order kept volatility low, while central banks adopted unconventional stimulus measures to sustain positive economic growth and neuter any crisis.
That era is quickly becoming a thing of the past. Quantitative easing (QE) measures are maxed out, liquidity is slowing, and money supply observer Michael Howell warns of an increasingly fiscal-dominated world. Others warn of the harsh consequences for investors of deglobalisation, a shrinking working-age population, and central banks that become partisan mouthpieces for interest-rate policy, ignoring economic evidence.
Second, there’s the discovery that the traditional 60-40 portfolio of stocks and bonds (fixed interest) no longer reflects the real world.
Since the Global Financial Crisis (GFC), private equity investors have had deep enough pockets to buy companies, keep them private, and back their growth without needing to tap public markets. And for the founders of those businesses, there’s a lot to be said for eschewing the regulatory requirements of being a listed public company.
Unsurprisingly, the number of listed public companies is shrinking. In Australia, the ASX is being hollowed out. In 2023-24 alone, 150 companies left the bourse, while the value of new equity raised was the weakest since 2012. In 1996, the U.S. had 8090 listed companies. This year, that number has fallen to 3943, a 51 per cent decline.
The number of listed public companies is shrinking. Meanwhile, a vast and expanding universe of investable businesses and associated securities exists in private markets, and investors benefit from attractive, risk-adjusted returns that also enhance portfolio resilience amid higher inflation and geopolitical uncertainty.
By investing in private equity, private credit and “alternatives”, Australia’s Future Fund says it is shifting towards greater resilience amid a “new investment order”.
That new investment order is not hyperbole. According to data from the World Federation of Exchanges and the World Bank, among companies with more than US$100 million in revenue in the U.S., Europe and Asia, 14 per cent are publicly listed, while 86 per cent are private.
In January, U.S.-based Apollo Global Management issued a note to clients titled, “After 60-40 – Modern Portfolio Allocation Across Private and Public Markets”, noting public markets now represent a shrinking slice of the real economy, but traditional portfolios haven’t changed.
Apollo writes, “For decades, the 60-40 portfolio allocation model has been top of mind for long-term investors. This mix of public equities and fixed income was designed to balance growth and stability, and provide the diversification benefits of assets with low correlation to each other.”
Today, however, more lending and credit creation occurs in private markets, meaning the 60-40 portfolio is becoming outdated. Meanwhile, Apollo notes, “the rising correlation between public stocks and bonds has practically eroded the diversification benefits of the traditional 60-40 portfolio, leaving investors more exposed to systemic risks”.
It could be the case that your adviser doesn’t offer access to private market investments. In that case, it’s your job to tell them. It could also be that you don’t know where to look for them. If that’s the case, read some of my previous columns. That’s step one.
Step two is to focus on private and alternative asset funds that provide the right mix of attractive returns, returns uncorrelated with public markets, ideally monthly or quarterly cash income, and the right risk profile. I am personally invested in two funds that have historical track records of 22.5 per cent and 7.5 per cent, have experienced few, if any, negative months and, most importantly, have produced positive returns during months when stock markets declined. If the stock market collapses, it shouldn’t matter; if it doesn’t, I am still aiming for attractive, “smooth” returns.
In a new world order – where geopolitical and financial regimes appear to be shifting quickly – I thought Warren Buffett’s US$381 billion parked in cash made a lot of sense. But cash returns are poor, and for investors with less than US$400 billion to invest, there are now very attractive AA-rated private alternatives that aim for better returns and little to no correlation with the stock market.
This article was first published in The Australian on 11 February 2026.
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