The 60/40 portfolio is not finished, but it needs reinforcement. Franklin Templeton's Michael Greenberg and Michael Dayan argue that stocks and bonds still hold their place in balanced portfolios. Stickier inflation and shifting stock-bond correlations mean the traditional model can no longer do all the heavy lifting alone. The two multi-asset specialists make the case for alternatives built in from the start, not attached after the fact. They describe how the Franklin Quotential program embeds private credit and real estate directly at the portfolio construction level.
The 60/40 portfolio has been declared dead many times, but performance data keeps arguing otherwise. Michael Greenberg, senior vice president and head of Americas portfolio management at Franklin Templeton Investment Solutions, has tracked annual press obituaries for the model for at least 15 years. His firm's Franklin Quotential Balanced Growth program posted a 15-year annualized return of 7.83 percent as of July 31, 2026. The conditions facing the model today are genuinely harder, however, particularly around inflation and deficits. "We are in an environment of slightly higher interest rates, stickier inflation, larger deficits," Greenberg says. "I wouldn't say it's broken, but it's bruised. It needs a bit of help." The core framework survives, but the evidence says it needs reinforcement, not replacement.
The reliable inverse relationship between stocks and bonds has weakened considerably in recent years. When inflation stays elevated for longer periods, stocks and bonds can fall together, removing the cushion that the 60/40 model traditionally counted on. This makes the portfolio more vulnerable during the drawdowns it was specifically designed to soften. Michael Dayan, head of portfolio analysis and portfolio manager on Franklin Templeton's multi-asset team, says advisors must update their fundamental assumptions about how diversification works. "What advisors need to recognize is that diversification today can't rely on that historical expectation of negative correlation benefits always being there," he says. "Balanced investing needs to provide more diversified sources of return, sources of income, as well as providing better risk mitigation." Shifting correlations mean bonds alone can no longer carry the full diversification load.
Greenberg frames alternatives around three distinct jobs rather than treating them as a single undifferentiated bucket. Private credit and infrastructure serve income generation. Private equity and opportunistic strategies target return enhancement. Real assets with cash flows tied to prices address inflation sensitivity, which he views as the most relevant role for the current environment. Getting the purpose right before selecting a product is the central message. "As an advisor who's looking to access alternatives, it's really, why are you adding them? Is it income generation, is it growth, is it inflation sensitivity? Be really clear on your reason," he says, then work toward the right asset class from there. Greenberg also cautions that alternatives need to be built into a portfolio from the construction stage, not layered on as an afterthought once the core allocation is already set.
Manager selection matters more in private markets than in almost any other asset class available to advisors. Greenberg draws a pointed contrast between the narrow return spread among US core equity fund managers and the wide dispersion found in private markets. US private equity buyout funds show a top-quartile return of 21.7 percent against a bottom-quartile return of just 3.2 percent, based on MSCI Private Capital Solutions data as of December 31, 2025. That gap is far larger than what most public market active managers produce, which means a poor manager choice in private equity costs far more than a poor asset-class call. "While it's quite important to properly communicate the asset class and why it belongs, it's equally or more important that you pick the right manager to get that exposure," Greenberg says. Due diligence on the manager, not just the strategy, is where outcomes are actually determined.
Retail investors have historically used alternatives far less than institutional investors, and Dayan traces this underuse to two distinct barriers: limited access and a perceived lack of urgency. Newer semi-liquid and evergreen structures with lower minimum investments are directly addressing the access problem by opening strategies that once required large institutional commitments. "Democratization of alternatives access has really helped address that historical dislocation," he says. The urgency barrier is more behavioural: many advisors built their practices during a period when public stocks and bonds delivered strong enough returns that looking further felt unnecessary. Dayan resists framing the current shift as something new or untested, calling it an extension of long-established institutional practices being made available to a broader group of investors rather than a departure from proven principles.
Neither Greenberg nor Dayan oversells what alternatives deliver, and liquidity constraints sit near the top of the honest accounting. Fees, reduced liquidity, and added complexity all need to be justified by what the allocation actually contributes to risk-adjusted outcomes. Greenberg describes stress-testing a private allocation by modelling a simultaneous market drawdown and a large client redemption. If a client redeems 20 percent of their holdings at once, a 10 percent allocation to private assets can effectively double in weight within the remaining portfolio. Getting sizing right from the outset protects a client from being forced to sell at the worst possible moment. "There's an advantage to this structure because there's liquidity, but it's not as liquid as your daily traded ETF or mutual fund," he adds. Honest sizing and realistic liquidity expectations matter as much as asset class selection.
Franklin Quotential, co-managed by Greenberg and Dayan, now incorporates private assets, including private credit and real estate, directly at the portfolio construction level rather than as separate add-ons. The program handles asset allocation, fund selection, and risk management centrally, and manages know-your-product obligations, liquidity profiling, suitability assessment, and position sizing at the program level. This removes the private markets due diligence burden from individual advisors, which Dayan sees as a meaningful practical advantage for practices that lack specialist internal resources. Where alternatives sit in the construction process matters as much as whether they appear at all. "When alternatives are layered into a traditional portfolio in isolation, they can sometimes end up operating independently without a clear connection to the broader risk framework," he says. Integration from the start, he argues, changes the risk outcome in ways that bolting on alternatives later simply cannot replicate.
Michael Greenberg: senior vice president and head of Americas portfolio management, Franklin Templeton Investment Solutions; co-portfolio manager, Franklin Quotential program.
Michael Dayan: head of portfolio analysis and portfolio manager, Franklin Templeton multi-asset team; co-portfolio manager, Franklin Quotential program.