cio discussion on uncertainty, diversification and the future of the 60/40 portfolio

The closing session of IMpower FundForum 2026 in Monaco asked how leading multi-asset CIOs manage uncertainty when politics trumps economics, and whether the traditional 60/40 portfolio still deserves its place. Four allocators took the stage: Rémi Lambert of BNP Paribas Asset Management, Piers Hillier of Jupiter Asset Management, Demir Bektic of Commerzbank Wealth and Asset Management, and Henry Cobbe, founder and head of research at Elston Consulting.  Luke Hyde-Smith, Head of Multi-Asset at W1M moderated the discussion.  The discussion was held under the Chatham House Rule.

Multi-Asset CIOs on Uncertainty, Diversification and the Future of 60/40

The closing session of IMpower FundForum 2026 in Monaco asked how leading multi-asset CIOs manage uncertainty when politics trumps economics, and whether the traditional 60/40 portfolio still deserves its place. Several experienced allocators took the stage alongside the moderator to discuss the challenges facing investors.

The panel's starting point was that volatility is no longer an event but a condition. One speaker observed that market shocks which once arrived every decade or two now seem to occur every year, from the pandemic to the 2022 bond rout, tariffs and this year's conflict in the Middle East. The prescription was to keep a cool head, treat noise as opportunity, and keep returning to fundamentals: growth, inflation and whether companies can continue to generate earnings.

Another speaker traced the turbulence back to the post-pandemic stimulus that was never matched by an appropriate interest-rate response and drew a harsher lesson for allocators. In this speaker's view, investors relying on a simple mix of equities, bonds and cash suffered significantly from long-dated bonds between 2021 and 2024, whereas more diversified investors preserved wealth through allocations to gold and other diversifiers. The discipline now, the speaker argued, is balancing human bias against objective data - neither becoming euphoric about AI nor overly pessimistic about China.

One panellist outlined a constructive view on equities, describing a genuine bull market built on strong earnings growth and AI-related investment rather than expanding valuation multiples, with resilient global growth confounding recession forecasts. However, the speaker highlighted three risks: concentration that has migrated from the Magnificent Seven to the sub-sector level, with software stocks under pressure while semiconductors outperform and major indices becoming increasingly technology-heavy; sticky inflation keeping rates higher for longer; and geopolitical risks ranging from energy prices to trade policy. The conclusion was that this late-cycle expansion will require investors to focus more closely on earnings quality than on valuation.

Some of the strongest warnings focused on government debt. One speaker argued that politics most clearly overrides economics when debt becomes unsustainable, pointing to projections showing UK debt-to-GDP potentially rising dramatically over coming decades if productivity remains near recent levels rather than returning to the higher levels assumed in many official forecasts. The speaker expressed structural caution on long-dated government bonds and long-duration fixed income more broadly, describing them as nominal promises that currently offer neither effective defence nor diversification in a world of higher-for-longer rates and stickier inflation.

The same speaker suggested that many emerging markets now appear to be in stronger fiscal health than some developed economies, arguing that the traditional perception of fiscal prudence has been reversed. Preferred exposures included ultra-short-dated debt and emerging market debt. Another panellist echoed the positive view on certain emerging market government bonds and argued that fiscal challenges extend beyond the UK to other developed economies. Notably, when an audience member asked whether the entire panel was bearish on long bonds, one participant dissented, suggesting that a sufficiently powerful AI-driven productivity boom could prove highly disinflationary and ultimately benefit long-duration assets.
If bonds no longer fulfil their traditional portfolio role, what replaces them? One speaker, who had previously argued for rethinking the traditional 60/40 model, urged allocators to define alternatives by correlation rather than by asset-class labels. Investments marketed as alternatives but moving in line with equities and bonds were described as "diversification in name only." True diversifiers, the speaker argued, demonstrate persistently low observed correlation to traditional assets. The recommendation was to focus directly on the risk being hedged: if inflation is the concern, investors should consider assets positively correlated with inflation, including floating-rate notes, commodities, mortgage-backed securities and certain forms of liquid infrastructure and property.

Another panellist described replacing part of a traditional bond allocation with liquid alternatives available through UCITS structures, primarily equity market-neutral and multi-strategy funds targeting returns modestly above cash.

The closing quick-fire round revealed genuinely active positioning across the panel. One speaker remains constructive on risk assets, has increased exposure to Europe as a diversifier away from the dominant AI theme, sees defence-related opportunities, has added emerging market debt and maintains an allocation to catastrophe bonds. Another speaker had reduced exposure to gold early in the year in favour of emerging markets, prefers Asian markets on valuation grounds and sees opportunity in prime real estate as rental growth improves.

A further panellist described using oil as a tactical hedge during periods of geopolitical uncertainty, maintaining exposure to copper as a long-term beneficiary of AI-related demand and combining US large-cap equities with equal-weighted US equities and UK equity income strategies to improve diversification. Another speaker remains overweight momentum and small-cap equities for the late cycle while favouring short-duration high-yield bonds and maintaining a strategic allocation to gold.
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The moderator's summary captured the mood of the discussion. A static 60/40 portfolio left unchanged belongs to a calmer era. What replaces it is active asset allocation and a much more demanding definition of diversification.