Rethinking Asset Allocation for Modern Portfolios

In today’s market, traditional stock-bond asset allocation strategies are falling short. Explore KKR’s modern asset allocation framework for integrating private markets to help you build more resilient portfolios and achieve desired outcomes.

Why Asset Allocation Needs to Evolve

Over the next decade, achieving compelling returns with the 60/40 portfolio will be challenging. A shifting macroeconomic environment and heightened volatility are expected to impact performance across asset classes, making it increasingly challenging to achieve portfolio objectives through public market exposure alone.

Historical vs. Expected Returns Across Asset Classes

Bar chart comparing historical and expected five year returns across asset classes, showing lower projected returns for the S&P 500 and private equity, modest declines for private credit and infrastructure, and higher expected returns for global bonds and private real estate. — Source: Bloomberg, BofA, Burgiss, Cambridge, KKR Global Macro & Asset Allocation analysis. As of 2Q25. Last 5-Years return from October 31, 2020 to October 31, 2025 for consistency across asset classes. Private Credit refers to Direct Lending. No representation is made that the trends depicted or described above will continue. Expected returns are hypothetical in nature and are shown for illustrative, informational purposes only. Past performance does not guarantee future results. Indexes are unmanaged. It is not possible to invest directly in an index.

Why Allocate to Private Markets?

Looking ahead, private markets are becoming increasingly important for income and return generation, diversification, and inflation resilience.

Investors may consider asset allocations strategies with more predictable, durable cash flows—such as Private Credit, Infrastructure, and Real Estate—alongside Private Equity strategies focused on value creation and long-term growth. Diversifying across these private market asset classes can help investors build all-weather, resilient asset allocation strategies.

Realized Annual Returns and Volatility Comparison with Traditional Assets and Private Equity, %

Line chart comparing 20 year realized annual returns and volatility, showing that adding private equity shifts the efficient frontier upward, delivering higher returns for a given level of volatility compared with traditional assets alone. — Source: Bloomberg, MSCI, Cambridge. KKR Global Macro & Asset Allocation analysis. Returns and correlations are calculated with quarterly returns between 2005 and 2024. Volatilities are calculated with annual calendar year returns between 2005 and 2024. Traditional Assets include Public Fixed Income (Bloomberg Global-Aggregate Total Return Index Value Hedged USD) and Public Equities (MSCI World Index). Private Equity is modeled using Cambridge Global Buyout Index. Indices are unmanaged and cannot be invested into directly. For illustrative purposes only. Past performance is no guarantee of future results.

Asset Allocation Framework in Action

KKR has developed an asset allocation framework around three core investment outcomes: capital preservation, income, and growth. This outcome-driven approach offers advisors an intuitive starting point for determining how private market alternatives can be incorporated to meet distinct portfolio needs.

Explore the models below to learn how different allocation strategies map to key portfolio objectives.

Capital Preservation
Income
Growth

Capital Preservation

For clients seeking stability. This model is designed to help reduce volatility while protecting capital from the erosive effects of inflation.

View the Model

Target Allocation
30% Private Markets

Primary Private Assets
Private Credit
Infrastructure

Historical Difference in Volatility vs. 60/40
-310 basis points

Donut chart illustrating a capital preservation portfolio allocation with 40% bonds, 30% equities, 12.5% private credit, 7.5% private infrastructure, and 5% each to private equity and private real estate.

Income

For clients seeking consistent and durable cash flow. This model is designed to provide steady income and supplement traditional fixed-income allocations.

View the Model

Target Allocation
30% Private Markets

Primary Private Assets
Private Credit

Difference in Historical Income vs. 60/40
+140 basis points

Donut chart showing an income portfolio allocation with 40% bonds, 30% equities, 15% private credit, 7.5% private infrastructure, and 7.5% private real estate.

Growth

For clients seeking long-term capital appreciation. This model is designed to maximize growth potential and build lasting wealth over time.

View the Model

Target Allocation
30% Private Markets

Primary Private Assets
Private Equity

Historical Difference in Returns vs. 60/40
+50 basis points

Donut chart displaying a growth portfolio allocation with 45% equities, 25% bonds, 15% private equity, and 5% each to private credit, private infrastructure, and private real estate.

This model portfolio framework is designed as an illustrative starting point rather than a prescriptive solution and should be adapted to align with each client’s individual objectives, risk profile, and investment horizon.

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Q1 2026 Global Wealth Investment Playbook

Rethinking Asset Allocation for Modern Portfolios

In today’s market, traditional stock-bond asset allocation strategies are falling short. Explore KKR’s modern asset allocation framework for integrating private markets to help you build more resilient portfolios and achieve desired outcomes.

Why Asset Allocation Needs to Evolve

Historical vs. Expected Returns Across Asset Classes

Why Allocate to Private Markets?

Realized Annual Returns and Volatility Comparison with Traditional Assets and Private Equity, %