“The 60/40 portfolio historically did [these] four different jobs for you. … In the old days, we used to be able to get away with that with just two asset classes. We don’t trust fully those asset classes to do those four jobs anymore.”

That means advisors will need new tools to reach those four goals. “What strategies do we like to achieve those jobs? … For growth, instead of just stocks, of course stocks are still a big part of the story, but we’ve got private equity strategies, we’ve got activist strategies and real estate and venture and distressed. ”

For inflation protection he says there are now timber, gold, water, developable real estate, art and collectibles, and TIPS and infrastructure bonds.

Income, one of the jobs bonds used to do, can now come from MLPs, farmland, peer-to-peer lending and emerging market debt—even music royalties. For downside protection there are long-short equity strategies, long-short credit strategies, global macro, arbitrage strategies, futures, black swan strategies, etc.

And the sizes of the investments in these four “circles” will be adjusted according to each client’s needs. “Retirees might look like this, young people might look like this,” he said. “You allocate from the asset class that used to do the job that you’re trying to achieve with the new investment.”

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