The traditional 60/40 portfolio has relied on a deep and diverse public equity market to deliver growth, while bonds provided income, stability, and an inverse correlation that helped cushion equity drawdowns. That dynamic is changing as the historical negative correlation between stocks and bonds has weakened, and the pool of publicly traded companies has contracted meaningfully since the 1990s, reducing the portfolio’s natural defense against risk.1
The number of public-company listings in the United States peaked in the mid-1990s and has fallen substantially over the past two decades, reducing the universe of investable public equities for diversified portfolios.2
Regulatory complexity and costs are often cited as reasons companies avoid going public, but recent research suggests these factors explain only a small portion of the decline in listings. Structural shifts in capital formation are driving far more of the change than regulatory burdens alone.3
Large, high-value companies are increasingly choosing to stay private for longer, fueling the expansion of private capital to meet their financing needs. Several of the world’s largest and most innovative companies remain private, reducing the flow of new public opportunities and concentrating value in a smaller set of listed names.4
There can be no assurance that historical trends will continue.
Initial public offering (IPO) activity has also been uneven and, since the 2021 boom, materially lower in many years, leaving fewer new listings to refresh the public market. IPO volumes have dropped sharply from recent peaks, reinforcing the trend toward a smaller, more concentrated public equity market.6
Fewer publicly traded companies means fewer distinct sources of return and reduced diversification within the equity sleeve of a 60/40 portfolio. When the investable equity set narrows and market value concentrates in mega-cap names, portfolios become more dependent on a handful of large companies. That concentration raises the risk that equity returns will be driven by idiosyncratic outcomes at a small number of firms rather than broad-based economic growth.
There can be no assurance that historical trends can continue.
At the same time, bond markets face their own limits. Low yields, interest rate uncertainty, and inflation risk compress the traditional income cushion that once made a 40 percent bond allocation a reliable shock absorber.8 When equity market participation narrows and fixed income offers limited upside and higher correlation to equities, the historical balance of risk and return that underpins the conventional 60/40 portfolio begins to deteriorate, prompting investors to rethink and restructure their approach to portfolio construction.
As public markets become more concentrated and equity breadth continues to shrink, investors face a range of practical challenges that directly impact portfolio construction and performance expectations:
Public equity alpha is harder to capture. A shrinking universe of investable names limits opportunities for active stock selection and early-stage growth exposure.
Diversification is less reliable. Rising correlations during market stress reduce the protective value of equity diversification.1
Benchmarks are increasingly concentrated. Portfolios rely more heavily on a few mega-cap stocks, amplifying concentration risk and reducing access to private innovation.
As public markets grow more concentrated and less effective at delivering diversification or excess returns, alternative investments offer a broader toolkit to navigate these structural constraints. Alternatives introduce distinct sources of return, offer access to private segments of the economy, and help offset the limitations of traditional equity and fixed income exposures.
To navigate the structural challenges in public markets, investors could explore a range of alternative strategies that offer distinct benefits. Private credit provides consistent yield and access to corporate lending markets not captured in public indices. Private equity enables participation in early-stage growth and provides access to companies that remain outside public markets altogether. Real assets contribute income and inflation protection, complementing the reduced defensive nature of bonds. Appropriate allocation to these strategies could broaden portfolio exposures, improve balance across return sources, and strengthen resilience in shifting market conditions.
Access to alternative investment opportunities is simultaneously expanding for private wealth investors. As vehicles offering lower minimums, greater transparency, and streamlined structures become more widely available, strategies like private credit, private equity, and real assets are no longer reserved for institutions. They are becoming essential components of modern portfolios, offering exposure to parts of the economy that traditional public markets no longer fully capture.
Education plays a key role in unlocking this potential. Advisors who invest in their own learning can confidently guide clients through the expanding landscape. Investors who engage with these conversations are better equipped to make informed decisions. Together, this shared understanding could lead to stronger alignment, better outcomes, and more resilient portfolios.
Portfolio construction must evolve beyond legacy assumptions. The shrinking public equity universe challenges the foundational logic of traditional asset allocation. Investors need to rethink how growth, income, and diversification are sourced in a structurally distinct market environment.
Private markets are no longer niche—they're necessary. The scale and maturity of private capital markets now rival public ones. Allocating to private strategies is not just opportunistic, it is increasingly essential for accessing growth, yield, and differentiated return streams.
Access and education are the new edge. With alternative investments becoming more available to wealth investors, the ability to evaluate, integrate, and communicate these strategies is emerging as a key differentiator for both advisors and investors.
Reframing portfolio strategy in response to structural shifts could help advisors and investors to tap into broader opportunity sets, reduce concentration risk, and strengthen long-term resilience.
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Endnotes
Important information
Unless otherwise noted the Report Date referenced herein is as of December 2025.
Past performance is not a guarantee of future results.
Assets Under Management (“AUM”) refers to the assets that we manage, and is generally equal to the sum of (i) net asset value (“NAV”); (ii) drawn and undrawn debt; (iii) uncalled capital commitments; (iv) total managed assets for certain Credit and Real Assets products; and (v) par value of collateral for collateralized loan obligations (“CLOs”) and other securitizations.
The material presented is proprietary information regarding Blue Owl Capital Inc. (“Blue Owl”), its affiliates and investment program, funds sponsored by Blue Owl, including the Blue Owl Credit, Real Assets, and GP Strategic Capital Funds (collectively the “Blue Owl Funds”) as well as investment held by the Blue Owl Funds.
The views expressed and, except as otherwise indicated, the information provided are as of the report date and are subject to change, update, revision, verification, and amendment, materially or otherwise, without notice, as market or other conditions change. Since these conditions can change frequently, there can be no assurance that the trends described herein will continue or that any forecasts are accurate. In addition, certain of the statements contained in this material may be statements of future expectations and other forward-looking statements that are based on the current views and assumptions of Blue Owl and involve known and unknown risks and uncertainties (including those discussed below) that could cause actual results, performance, or events to differ materially from those expressed or implied in such statements. These statements may be forward-looking by reason of context or identified by words such as “may, will, should, expects, plans, intends, anticipates, believes, estimates, predicts, potential or continue” and other similar expressions. Neither Blue Owl, its affiliates, nor any of Blue Owl’s or its affiliates' respective advisers, members, directors, officers, partners, agents, representatives or employees or any other person (collectively the “Blue Owl Entities”) is under any obligation to update or keep current the information contained in this document.
This material contains information from third party sources which Blue Owl has not verified. No representation or warranty, express or implied, is given by or on behalf of the Blue Owl Entities as to the accuracy, fairness, correctness or completeness of the information or opinions contained in this material and no liability whatsoever (in negligence or otherwise) is accepted by the Blue Owl Entities for any loss howsoever arising, directly or indirectly, from any use of this material or its contents, or otherwise arising in connection therewith.
All investments are subject to risk, including the loss of the principal amount invested. These risks may include limited operating history, uncertain distributions, inconsistent valuation of the portfolio, changing interest rates, leveraging of assets, reliance on the investment advisor, potential conflicts of interest, payment of substantial fees to the investment advisor and the dealer manager, potential illiquidity, and liquidation at more or less than the original amount invested. Diversification will not guarantee profitability or protection against loss. Performance may be volatile, and the NAV may fluctuate.
Performance Information:
Where performance returns have been included in this material, Blue Owl has included herein important information relating to the calculation of these returns as well as other pertinent performance related definitions.
This material is for informational purposes only and is not an offer or a solicitation to sell or subscribe for any fund and does not constitute investment, legal, regulatory, business, tax, financial, accounting, or other advice or a recommendation regarding any securities of Blue Owl, of any fund or vehicle managed by Blue Owl, or of any other issuer of securities. Only a definitive offering document (i.e.: Prospectus or Private Placement Memorandum) can make such an offer.