Northside CIO Jim DeWolfe says investors are turning to alternatives as 60/40 portfolio falls short
The traditional 60/40 portfolio of stocks and bonds no longer delivers the returns investors need, pushing more money into alternatives such as hedge funds and private credit, according to Jim DeWolfe, co-founder and chief investment officer at Northside Capital. Over the past 35 years, the classic 60/40 mix of global stocks and bonds has generated an annualized return of about 6.6%, and that’s before accounting for any fees, DeWolfe noted. In his view, that level of performance isn’t enough to meet the long-term return targets of most investors today, which is why so many are rethinking traditional portfolio construction. He said this return shortfall has led many allocators to expand into alternative asset classes. “With yields and valuations both stretched, investors are increasingly embracing alternatives to generate higher returns,” DeWolfe said. “We’ve seen a lot of money moving into hedge funds and private credit. Even though private equity and venture have had a slow distribution period, there’s still strong appetite in that category.” At his firm, portfolios are structured in a “barbell” fashion, balancing public-market opportunities with select private investments that offer greater flexibility than traditional buyout funds. “Some of the privates we invest in are committed-capital structures where there are consistent distributions,” he said. “They don’t have the same 10-year fund life with extensions that you’d see in a traditional private-equity fund.” DeWolfe also emphasized the importance of private markets for accessing innovation and growth that remain largely outside the public sphere. “Roughly 85% of companies with revenues greater than $100 million are private,” he said. “You really have to be in that business to capture a big part of the economy.”
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