The Power of Private Markets
It is generally harder today for investors to find meaningful sources of diversification in their portfolios.
Traditionally, publicly traded stocks and bonds were considered the building blocks of a portfolio. A traditional portfolio was often considered meaningfully diversified when split with a 60% allocation to stocks and 40% allocation to bonds, where stocks would provide capital appreciation and bonds would provide downside mitigation and income. However, in recent years, rising stock-bond correlations have posed challenges to this traditional 60/40 portfolio.
Source: Bloomberg as of January 31, 2024. Correlation between stocks and bonds is represented by the average trailing 12-month correlations over the indicated periods. Stocks are represented by the S&P 500 Index. Bonds are represented by the Bloomberg US Aggregate Bond Index.
Private Markets: Beyond the 60/40 Portfolio
Illustrative Traditional 60/40 Portfolio
| Illustrative Traditional Portfolio | |
| Annualized Return | 7.9% |
| Annualized Volatility | 13.4% |
Illustrative Portfolio with Private Market Allocations
| Illustrative Private Market Allocations | |
| Annualized Return | 9.1% |
| Annualized Volatility | 11.0% |
Historically private markets have provided meaningful downside mitigation across business cycles. From our research, over the past 5 years, an allocation to the private markets through private equity, private real estate, and private credit has resulted in higher annualized returns with lower volatility. These diversification benefits are possible as private markets may potentially offer return streams that have lower correlation to the public markets. Therefore, we believe the addition of private assets to a portfolio may boost risk-adjusted returns, and may act as a compelling complement to traditional holdings.
Source: Bloomberg, Cambridge Associates, NCREIF, as of December 2023, latest available. The 60/40 portfolio is 60% allocated to the S&P 500 Index and 40% allocated to the Bloomberg US Aggregate Bond Index. Private Credit is represented by the Cliffwater Direct Lending Index. Private Real Estate is represented by the NFI- ODCE Index. Private Equity is represented by the Cambridge Associates US Private Equity Index. Annualized returns and annualized volatility are calculated based on quarterly returns over the 5-year period from July 2018 to June 2023. Past performance is no guarantee of future results. The information herein is provided for educational purposes only. The benchmarks, indices and portfolio concentration provided herein were selected by Fortress for illustrative purposes only. Selection of such benchmarks, indices and/or portfolio concentration is inherently subjective and others might select other benchmarks, indices or portfolios based on their assessment of the market. These returns do not reflect the portfolio of any specific investor, and there can be no assurances that any investor will receive the returns shown herein. Actual returns may be materially different.