BlackRock CEO Larry Fink thinks the traditional 60/40 portfolio of stocks and bonds, the stalwart recommendation for investors since the 1950s, is past its prime.

This time-tested approach to investing “may no longer represent true diversification,” Fink writes in his latest investor letter.

“Assets that will define the future — data centers, ports, power grids, the world’s fastest-growing private companies — aren’t available to most investors,” says the CEO of the world’s largest asset manager, with $10 trillion under management.

“They’re in private markets, locked behind high walls, with gates that open only for the wealthiest or largest market participants.

“The reason for the exclusivity has always been risk. Illiquidity. Complexity,” Fink continues. “That’s why only certain investors are allowed in. But nothing in finance is immutable.”

Fink believes the “future standard portfolio” should be comprised 50/30/20 of stocks, bonds, and private assets like real estate, infrastructure and private credit.

It is no wonder Fink may be making this pitch, as BlackRock recently acquired Global Infrastructure Partner, Preqin, and HPS Investment Partners to bring private equity investments to retail investors, oestensibly through 401(k) retirement plans.

Fink likens this transformation in investing to how index funds grew in popularity vis-à-vis actively managed funds at the turn of this century.

Angeles Investments Chief Investment Officer Michael Rosen agrees with Fink, telling CNBC a 50/30/20 is close to how institutional investors handle billion-dollar pensions and endowments.

After stocks and bonds both declined in 2022, some financial advisers thought the 60/40 portfolio was dead. However, in 2024, a typical 60/40 portfolio would have returned 14%.

“If you want to keep things very simple, the 60/40 portfolio or a target-date fund is a great starting point,” says Amy Arnott, a portfolio strategist with Morningstar.

If an investor is willing to take on more complex assets, they can include commodities, private equity and private debt in their portfolio.

However, the total value of private assets worldwide is $14.3 trillion, whereas public markets trade $247 trillion, so a less aggressive allocation to private assets, Arnott thinks, is 6% rather than 20%.

However, because of the lack of liquidity, transparency and performance data, not to mention higher fees, in private assets, Arnott believes investors should be prepared to hold such assets for at least 10 years.

To date, however, very few 401(k) plans have added private equity to their investment lineup, though Arnott thinks that could change.

“We will probably see more plan sponsors adding private equity options to their lineups going forward,” she said.