Diversification across public equities and safe-haven bonds has been a cornerstone in multi-asset investing for decades. Within this framework, the so-called balanced or 60/40 portfolio has risen to become one of the most popular asset allocations for institutional and private investors alike. After the Great Financial Crisis, however, stubbornly low interest rates depressed the expected returns for the traditional portfolio and, together with rising government debt, raised questions about its robustness. Investors have often turned to alternative investments to expand their asset allocation framework. Rightly so?

• Traditional multi-asset investing, premised primarily on diversification across public equities and safe bonds, and most emblematically represented by the famous 60/40 portfolio, has been a bedrock of long-term investing for decades.

• Low interest rates and historically elevated equity valuation multiples following the Great Financial Crisis have prompted numerous obituaries on the framework.

• Critics of relatively simple multi-asset portfolios typically argue for the necessity of including alternatives such as hedge funds and private markets to achieve effective diversification and construct an efficient portfolio.
• In this article, we analyse the performance of traditional multi-asset portfolios over the past 25 years and estimate the evolution of the effectiveness of equity-bond diversification before and post-Great Financial Crisis, and take a critical look at the proposed alternatives.