Beyond 60/40: The rise of hedge funds in modern portfolios

Nov 19, 2025

Joe Dowling, Senior Managing Director at Blackstone and former steward of Brown University's endowment, dives into the evolving landscape of investment strategies. He discusses how hedge funds are becoming a core allocation for resilience, potentially replacing traditional bonds. Joe explains the endowment model's focus on diversification and long-term stability, highlighting the importance of absolute return strategies and multi-strategy funds. He also shares insights on constructing robust portfolios and the democratization of access to private markets.

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ANECDOTE

Ivy Endowments Go Very Heavy

Joe describes top Ivy endowments allocating up to 75-80% to alternatives due to large capital and duration.
He warns this extreme split isn't a blanket recommendation but shows the range of institutional positioning.

ADVICE

Use Hedge Funds As Bond Replacements

Use hedge funds, especially absolute-return strategies, as a bond substitute when yields are low.
Anchor the fixed-income sleeve with hedge funds to meet required payouts and protect portfolio income.

INSIGHT

Multi-Strats Add A Third Engine

Multi-strategy hedge funds act like a third uncorrelated engine for portfolios, providing diversification beyond stocks and bonds.
Multi-strats aggregate many independent teams to deliver consistent, durable returns and high Sharpe ratios.

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The Beyond Markets podcast channel is wrapping up on a high note at the end of 2025. But do not worry! The conversation continues on our podcast Moving Markets by Julius Baer, where we'll be sharing fresh insights and analysis on current market developments.

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As markets evolve and the traditional 60/40 portfolio faces new challenges, are hedge funds becoming the next core allocation for resilient investing? In this episode of Beyond Markets, William Fong, Head of Alternatives Specialists at Julius Baer for Asia and the Middle East, speaks with Joe Dowling, Senior Managing Director and Global Head of Blackstone Multi-Asset Investing (BXMA), about how the endowment model is reshaping portfolio construction.

Joe shares insights on why institutions have leaned heavily into alternatives, how multi-strategy hedge funds are delivering uncorrelated returns, and what private investors can learn from the playbook of elite endowments. From risk management to the “democratisation of alternatives”, this episode explores how hedge funds may just be part of the new 60/40 for long-term investors seeking durability and diversification.

This episode was recorded on 28 October 2025.

(00:10) - – The endowment model
(03:53) - – Is it limited to institutional investors?
(05:31) - – A typical allocation split
(06:57) - – The importance of a long-term approach
(07:45) - – Recent criticisms of the endowment model
(09:32) - – Hedge funds: a bond substitute?
(11:52) - – The rise of multi-strategy funds
(13:53) - – How multi-strategy funds have performed throughout volatility
(15:42) - – What to look for in a good multi-strategy fund
(17:02) - – Absolute return vs index investing
(19:02) - – Are multi-strategy funds getting too big?
(20:46) - – Are single-manager, single-strategy funds still relevant?
(22:01) - – Rebalancing – a critical element
(23:13) - – Fund manager expertise, and the art of portfolio construction
(27:30) - – Thoughts on private equity and infrastructure
(32:02) - – An ivy league education? Or an alternatives portfolio?