Australian investors are increasingly integrating hedge funds and liquid alternatives into their portfolios, as persistent inflation volatility and global macro-economic instability expose the limitations of the classic 60/40 split.
Investors are increasingly incorporating alternatives into traditional investment portfolios to mitigate vulnerabilities to volatile inflation amid global instability.
Ahead of his keynote address at the Australian Wealth Management Summit 2025, Michael McCorry, chief investment officer at BlackRock Australia, said volatility and macro-economic headwinds redefine the investment landscape, as a growing cohort of Australian investors is pivoting towards alternative strategies.
“We’re investing in a market shaped by heightened dispersion and ongoing macro uncertainty – conditions that are prompting investors to look beyond traditional assets,” he said.
“In the Australian wealth market, we’ve seen growing interest in hedge funds and liquid alternatives for their ability to deliver diversified, uncorrelated returns across market cycles.
“These strategies can offer downside protection, more consistent performance during periods of stress, and access to opportunities that are often unavailable through traditional investments.”
That shift is also prompting investors to reconsider conventional portfolio construction. The long-held 60/40 mix of equities and bonds is being replaced by a more modern 50/30/20 allocation – spreading investments across stocks, bonds, and alternatives – as investors seek greater diversification and resilience in an uncertain market.
“Alternatives are no longer limited to a single sleeve of the portfolio,” McCorry said.
“Investors are rethinking how hedge funds and liquid alternatives fit into their broader asset allocation – often using them as flexible, multi-outcome tools that can complement or even replace traditional equity or fixed income exposures.”
Earlier this year, BlackRock chairman and CEO Larry Fink highlighted that as the global financial system continues to evolve, the classic 60/40 portfolio may no longer fully represent true diversification.
However, Fink, in his letter to shareholders, conceded that while the 50/30/20 model has clear appeal, the investment industry is not yet structured to support this approach – it remains largely split between traditional asset managers focused on the 50/30 (stocks and bonds) and specialised private market firms dominating the 20 per cent allocation to private assets.
“Bridging the divide between the 50/30 and the 20 is almost impossible for most individuals,” Fink said.
“Even those who can afford it face another diversification problem within that 20 per cent. Often, they barely have enough capital to meet the minimum for just one private fund – and having 20 per cent of your portfolio locked up in a single fund isn’t really diversified.”
To hear Michael McCorry talk more on the rising prominence of alternatives in investment portfolios and the 50/30/20 model, come along to the Australian Wealth Management Summit 2025.
Run in partnership with principal partner Metrics, the summit will take place on Friday, 22 August 2025 at Sofitel Sydney Wentworth. Click here to buy tickets.
To learn more about the event, including the agenda and speakers, click here.
