Yahoo Finance

BlackRock CEO Larry Fink is proposing a tweak to the traditional 60/40 portfolio strategy. Yahoo Finance's Carrie Hannon is here now with more on Fink's proposed portfolio model. Now he's Carrie, we should say he's not the first guy. I've seen sort of an increasing drum beat of this kind of proposal over the past couple of years, but it keeps getting sort of more and more high profile.

Yeah, Julie, you're absolutely right. I mean, this idea has been floated around for a while. But what's what's interesting is his letter that came out this week is very powerful in getting a message of what the big trends are out there. And what he's proposing is the idea that the investment portfolio goes from 60/40, which we've has sort of become the benchmark for 60% equities, 40% in bonds to kind of teeter totter even out markets. When things are flying high, you've got your equities, when things aren't so great, you've got the bonds to kind of moderate things. So this creates a really moderate portfolio moving forward. What what Larry Fink is saying a 50 equity, 30 bond, 20% of the portfolio goes into alternative investments. And he's talking about infrastructure things, real estate, that sort of thing, private equity. And this this idea is is to sort of build out even, he said we absolutely need more diversification because even though the other model has been successful, um, and it's now being tested by inflation, by volatility, by these rapidly changing policies. Um, and people just don't know the uncertainty. And he thinks moving forward, we need more on the diversification. Now, just quickly, I'll say there are drawbacks. Why this has not happened to date is these can be quite expensive for an individual to get into. Minimums of maybe $50,000 to get into private equity. Um, you might you have to have salary limits of say of minimums of say $200,000 a year and more, you know, or $5 million in assets. Uh, they're not very liquid, they can have high fees with them. And so it's not as palatable for an individual investor to get into these kinds of things. Uh, so I think that we're going to see uh, some movement if he's really pushing to this diversification rate. But we'll see what happens for whether individuals can find a way into this in order to build out moving forward.

Yeah, I suspect that the uh, this industry will get creative in the next couple of years and come out with some alternative asset products perhaps that might be a little bit more accessible. And that brings me to my next question, which is, you know, would this work in a 401k kind of format for retirement savers?

Yeah, Julie, I love that question and he does address that. I mean he says, you know, Fink is concerned that retirees simply aren't going to have enough with their social security checks in order to uh, meet their their cost of living moving forward in the future. And so his idea is, okay, let's do this. You know, this is perfectly legal to have these private asset uh, in a retirement plan. There's nothing holding people back except he says that 401k providers just aren't familiar with the people who actually make these selections right now, don't quite understand how these work. And his his suggestion is, okay, most people love target date funds, right? These are funds where you're setting the date you might retire, maybe it's 2045, 2055. These have long-term uh, ranges before someone's going to dip into them. He says, put that 20% in a target date fund. And that way people understand that it's for the long term, they're not trying to live on that money tomorrow. And a carve out 20% uh, in a target date fund that will go to these alternative investments, this uh, proposed portfolio model that that he is advocating.

Carrie, thanks so much. Good to see you.