Ditching the old playbook - the new model for modern portfolios

This interview was filmed 17th August, 2025.

For decades, the 60/40 portfolio (a blend of 60% equities and 40% bonds) was the gold standard.

But Brendan McCurdy, Head of Research and Marketing for Ares' wealth business, says today’s demographic, structural and market realities are pushing investors to rethink.

“Older investors want lower volatility and more income, while younger investors don’t believe traditional equities and fixed income will deliver the returns they need.”

He also points to high equity valuations as a key driver. 

"Prices are very high to buy in right now. And when you combine that with the fact that there are far more tools available today than in the 1960s or 70s, it makes sense investors are looking beyond the traditional playbook.”

This is where private markets come in. According to McCurdy, they’ve consistently provided attractive performance and could be a “nice complement” to public equities and bonds.

As he puts it: “If you were to start from scratch today, why would you use the old set of tools and ignore all the possibilities now available?”

Risk factors matter more than asset classes

One of the more compelling shifts in Ares’ philosophy is a move away from thinking in terms of asset classes, and instead focusing on risk factors as the underlying drivers of returns.

“As an asset allocator, it’s really tough to properly forecast forward-looking returns,” says McCurdy. “But you can have more control over volatility and correlation. That’s where risk factors could give you a clearer picture.”

For example, high-yield bonds often behave like equities. “About a third of the ups and downs that high-yield bonds go through are driven by what happens in equity markets. If you only think at the asset-class level, you’re missing what’s happening underneath.”

By breaking portfolios down into factors – equity and growth, interest rates, commodities, credit spreads, and alpha – investors could build more efficient portfolios with better risk-adjusted returns over time.

“Factors allow us to see what’s really driving portfolios up and down,” he explains. “That helps us better plan, and ultimately helps investors achieve smoother, more stable outcomes.”

The 50/50 sweet spot

Ares’ new moderate model allocates around 50% of portfolios to private markets – a figure McCurdy says balances diversification, return potential, and liquidity needs.

“Not every model is exactly 50%,” he clarifies. “But they all tend to cluster around that midpoint. The reason is that private markets are a really valuable source of diversifying factors, as well as alpha.”

Still, liquidity remains an important consideration. “There’s always the question of access," says McCurdy. "Investors need to balance how much of their portfolio they need to be able to access daily.”

For many, the answer is: less than they think. 

“Most investors don’t need 100% of their portfolio available the next day. You’re paying a price for that privilege when you stay entirely in public markets, and that price tends to be lower returns.”

Fishing in a bigger pond

One of the biggest risks investors face in public markets today is concentration. But McCurdy says the story looks very different in private markets.

“As public markets have shrunk – there are about half as many listed equities today compared to a few decades ago – private markets have actually expanded. Companies are staying private longer, or delisting, so they can focus on long-term growth without the quarterly analyst calls.”

That means investors tapping into private markets are fishing in a much bigger pond. “Depending on which markets you look at, the private side is six to ten times larger in terms of the number of companies."

He also highlights valuation differences. “Public market valuations have continued to climb, but in the private markets, they’ve been flat for the past three years. That’s created a big gap, where you’re often paying much less for a private company than for a similar public one.”

Importantly, flat valuations don’t mean flat returns. “So much of private equity returns now come from operational value creation – actually helping businesses grow and expand. That’s why private equity has continued to deliver attractive returns, even without valuation tailwinds.”

Where the alpha opportunities lie

McCurdy points to three key areas:

1. Real assets in the new economy
“Think about how much data we all use now – from our cars, our appliances, our entertainment, even how we work. That explosion of data is changing the kind of infrastructure and real estate the world needs.”

The bottleneck is power. “Many new data centres can’t even be built yet because they can’t get access to electricity. For infrastructure investors who can deliver that power, it’s a huge opportunity.”

In real estate, logistics warehouses, being the backbone of e-commerce, and modern residential properties for mobile younger workers, are front and centre.

2. Secondaries
McCurdy also highlights secondaries as a growing space. “If you can be a provider of liquidity to investors who need it, you can often buy private equity assets at a discount – 85 or 90 cents on the dollar. That’s very compelling.”

3. Sports media and entertainment
Finally, he notes a more niche but fast-emerging theme: sports media. “There’s this whole ecosystem beyond just the teams and leagues – the services, the media rights, the platforms. It’s a really fun and exciting investment opportunity we’re starting to see institutional investors embrace.”

The private markets mindset for the decade ahead

If McCurdy could leave investors with one lesson, it’s to think long-term and build allocations, not trades.

“So many investors think in terms of what’s the hot trade right now,” he says. “But in private markets, it’s about building a real allocation across the four major food groups – private equity, private credit, private real estate and private infrastructure.”

That allocation, he argues, should sit alongside traditional equities and bonds in any diversified portfolio.

“And for value-focused investors, I’d say look to the areas that are out of favour. That’s often where the real opportunity lies.”

Learn more

For further insights from the team at Ares Wealth Management Solutions, please visit their website.