Uncommon Sense: Challenging Market Conventional Wisdom

Markets are not static; they evolve, and so must our strategies.

For too long, investors have clung to outdated principles that no longer hold water in today's complex financial environment.

The year 2022 was a watershed moment, exposing the cracks in traditional approaches.

By questioning the status quo, we unlock new avenues for growth and protection.

Rethinking the 60/40 Portfolio

The classic 60/40 stock-bond mix has long been hailed as the gold standard for diversification.

However, in 2022, both equities and fixed income declined simultaneously, shattering the myth of perpetual negative correlation.

This event forced a reevaluation of what true diversification means.

• Equities and bonds fell together, highlighting correlation risk.
• Investors now seek structural diversifiers beyond public markets.
• Alternatives like private credit and real assets offer distinct risk engines.

Instead of fixing the old model, ask: What portfolio works when regimes change?

Structural diversifiers such as hedge funds or gold can provide stability in volatile times.

The Ascendancy of Private Markets

Conventional wisdom holds that public markets are where real growth happens.

Yet, private markets have ballooned to over USD 20 trillion in assets under management.

Private credit alone has grown tenfold since 2007, now exceeding $2.5 trillion.

Companies stay private longer, tapping into deep capital pools for growth.

Private equity has consistently outperformed public equities, underscoring the value of governance and operational improvements.

• Global buyout indices show a 5% annual premium over public markets.
• Middle-market deals offer less crowded opportunities with better valuations.
• The circular economy in private markets is undercapitalized and ripe for investment.

Illiquidity as a Strategic Advantage

Many investors fear illiquid assets, viewing them as risky and opaque.

However, illiquidity can be a feature, not a bug, providing higher yields and stronger covenants.

Private credit strategies deliver attractive returns compared to public fixed income.

Illiquidity premium compensates for the lack of daily liquidity, insulating from market stress.

• Private credit fills the gap left by constrained bank lending.
• Direct lending offers robust income even in rate-cutting environments.
• Real assets like infrastructure provide resilient cash flows and inflation hedges.

Infrastructure investments, such as data centers, are essential for AI growth.

Multifamily real estate generates steady rental income, supported by housing shortages.

Real assets are in a stealth bull market, benefiting from long-term trends.

AI: More Than Just Mega-Cap Stocks

The AI revolution is often reduced to buying a handful of tech giants.

In reality, AI drives a capex super-cycle across various sectors.

Digital infrastructure, including data centers and networks, is a critical growth area.

AI infrastructure requires massive investment in power and semiconductors.

• Natural resource equities benefit from AI's demand for metals and energy.
• Middle-market software companies are key players in AI application.
• Private equity funds early-stage AI innovations not yet in public markets.

By looking beyond the usual suspects, investors can tap into broader AI value chains.

This approach reduces concentration risk and enhances portfolio diversity.

Gold and Scarce Assets in Modern Portfolios

Gold is often dismissed as a relic, but its performance tells a different story.

In 2025, gold returned approximately 61% YTD, its best year since 1979.

Gold's resurgence challenges the notion that it's merely an emergency hedge.

• Gold provides a hedge against inflation and monetary debasement.
• Scarce assets like commodities offer protection in times of fiscal stress.
• Alternative strategies with low correlation to traditional markets add stability.

Incorporating these assets can defend against regime shifts and enhance returns.

They serve as a counterbalance when conventional assets falter.

Practical Steps for Embracing Uncommon Sense

To apply these insights, start by assessing your current portfolio's reliance on outdated beliefs.

Diversify into alternatives, but do so thoughtfully, considering risk tolerance and goals.

• Allocate a portion to private markets through funds or platforms.
• Explore real assets like infrastructure or real estate for income and growth.
• Include gold or commodities as a hedge against unforeseen events.
• Focus on middle-market opportunities to avoid overcrowded trades.
• Stay informed about AI's broader impact beyond tech stocks.

By challenging conventional wisdom, you build a portfolio that is not only resilient but also positioned for future growth.

Embrace change, and let data guide your decisions in this new era of investing.