Bruised, not broken: rethinking the 60/40 portfolio

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With market leadership narrow and inflation stickier, Franklin Templeton multi-asset specialists argue alternatives work best when built in, not bolted on

Going back through at least 15 years, Michael Greenberg can pull an annual newspaper article declaring that the traditional 60/40 is dead. But the senior vice president and head of Americas portfolio management at Franklin Templeton Investment Solutions has little patience for the recurring declarations that the model has failed. He notes that Franklin’s 60/40 portfolio − Quotential Balanced Growth − has delivered long-term returns over 7 percent through a long list of geopolitical and market crises.1 “We are in an environment of slightly higher interest rates, stickier inflation, larger deficits,” says Greenberg. “So that traditional framework of the 60/40 stock-bond offering, I wouldn’t say it’s broken, but it’s bruised. It needs a bit of help.” Greenberg lays out a case that has less to do with abandoning the balanced portfolio than with reinforcing it. Stocks and bonds, he says, “still have a key role in portfolios, but with correlations that can shift quickly, you don’t want to necessarily be static in that asset allocation.”

Franklin Resources, Inc. [NYSE:BEN] is a global investment management organization with subsidiaries operating as Franklin Templeton and serving clients in over 155 countries. In Canada, the company’s subsidiary is Franklin Templeton Investments Corp., which operates as Franklin Templeton Canada. Franklin Templeton’s mission is to help clients achieve better outcomes through investment management expertise, wealth management, and technology solutions. Through its specialist investment managers, the company offers boutique specialization on a global scale, bringing extensive capabilities in equity, fixed income, multi-asset solutions, and alternatives.

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“What advisors need to recognize is that diversification today can’t rely on that historical expectation of negative correlation benefits always being there. Balanced investing needs to provide more diversified sources of return, sources of income, as well as providing better risk mitigation”

Michael Dayan, Franklin Templeton

“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”

Michael Greenberg, Franklin Templeton

Published Aug 6, 2026

Michael Dayan, head of portfolio analysis and a portfolio manager on Franklin Templeton’s multi-asset team, makes a version of the argument that centres on what the model can no longer be expected to do on its own. Additions like shorter duration fixed income, alternative income strategies, real assets with inflation linkage, and liquid alternatives that behave differently from public markets must be part of the conversation.

“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.” The conversation is ultimately about balance. Advisors want greater diversification and more resilient portfolios, but they also need solutions that are liquid, scalable, and practical to implement across a wide range of clients. Greenberg and Dayan contend that modern multi-asset portfolios can increasingly deliver both: broader sources of return and risk mitigation without the complexity that has historically limited the use of alternatives. Three cups, not one bucketBoth strategists push back on treating alternatives as a single asset class. Greenberg frames the category around the job each strategy performs: income generation through private credit, real estate, and infrastructure; return enhancement through private equity and opportunistic strategies; and inflation sensitivity, the role he sees as most relevant now. Environments where growth weakens while inflation rises tend to push stock−bond correlations up, and private infrastructure and private real estate carry cash flows with more inflation protection built in. The discipline starts with purpose, Greenberg says. “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? Being really clear on your reason and then looking at what is the right asset class within privates that best delivers that from a fee and efficiency perspective.”

Despite heavy institutional use, retail uptake of alternatives remains low. Dayan attributes that to two factors: access and a perceived lack of need. On access, semi-liquid and evergreen structures with lower minimums are changing the picture. “Democratization of alternatives access has really helped address that historical dislocation,” he says. On need, many advisors built their practices during a stretch when public stocks and bonds simply worked, leaving little reason to look further. He resists framing the shift as novel. “In many ways this is about bringing alternatives into wealth portfolios. You may see that as innovative, but fundamentally it’s just about introducing proven long-term institutional practices to a broader set of investors.” Greenberg expects the gap between institutional and retail allocations to tighten rather than fully close, since the average retail investor has a different time horizon and capacity for illiquidity than an institution or ultra-high-net-worth family. Manager selection can make or break itIn private markets, manager choice matters as much as asset class choice. Greenberg contrasts the tight performance spread among US core equity managers in Morningstar rankings with what happens in private markets. “If you look at the difference between a top and bottom quartile private credit manager or private equity manager, that range can be quite wide,” he says. “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.” Dayan makes the same point in different terms: “Think of that as the alpha overpowering the beta.”

Franklin Templeton’s own approach is to “buy, not build,” Greenberg says, by conducting due diligence to identify outside managers and maintaining ongoing oversight of incentive structures and trading practices. Increasingly, the firm’s multi-asset team does that work for advisors directly, embedding alternatives within portfolios rather than leaving advisors to assemble exposures one strategy at a time. In Canada, the most visible expression of that philosophy is Franklin Quotential, where Greenberg and Dayan hold co-portfolio management responsibilities. The Quotential portfolios are built and run by the Franklin Templeton Investment Solutions team, with asset allocation,

fund selection, and risk management handled at the program level − and that now explicity includes private market allocations. The program has begun incoprating private assets, including private credit and real estate, directly into the Quotential portfolios, embedding exposure to the alternative asset classes at the portfolio construction level. It’s the same construction-first discipline the two strategists argue should govern how alternatives enter a portfolio. As Greenberg describes it, the team coordinates with clients on what they need, then “we’re doing the selection, we’re doing the portfolio construction implementation.” Critically for FAs, that means the know-your-product obligations, liquidity profiling, suitability assessment, and position sizing associated with private markets are managed at the program level − removing significant due diligence burden from advisors while still giving their clients exposure to asset classes that have historically been accessible only to institutional or high-net-worth investors. Dayan argues that where alternatives sit in the construction process matters as much as whether they are present. “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. An integrated approach considers how equities, fixed income, and alternatives interact across market environments, which for advisors can mean simpler implementation and a lighter operational burden. Setting honest expectations on liquidityNeither strategist oversells the category. Fees, liquidity constraints, and complexity are trade-offs that have to be justified by the change an allocation makes to the overall portfolio. “Advisors should approach alternatives with balanced expectations and position them as complementary tools rather than a silver bullet,” Dayan says. “Alternatives are not designed to outperform traditional markets in every environment.” On redemption concerns in parts of private markets, Greenberg argues the answer lies in sizing and candor. He describes stress testing an allocation against a market drawdown paired with a large withdrawal: Mr. and Mrs. Advisor’s client redeems 20 percent of their money at the same time, and that 10 percent allocation to privates suddenly becomes 20, or even higher. Get the sizing right, he says, and if you do get an environment where there’s a little bit less liquidity, that client is not in a forced selling position. In fact, they may even have room to add to private assets in stressed markets. “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. His advice is to work backward from the weakness and let it decide the outcome as far as manager selection, liquidity assessment, and understanding the product and its structure. “What are the areas that you’re concerned about? Is it upside capture, is it income, is it inflation protection? Once you’ve identified the weakness that you have, that often directs you to the right asset class as far as what category of alternative might make the most sense.”

Alternatives can accomplish many different goals within a portfolio

Role of alternatives

PRIMARY ROLES

Diversified income Return enhancement

Private credit

Inflation mitigation Income Diversification Thematic

Real assets

Diversification Risk mitigation

Hedged / Alternative strategies

Potential return enhancements

Private equity

25.020.015.010.05.00.0-5.0-10.0

The importance of high-quality manager selection

As of 5/14/2026. Sources: Morningstar, MSCI Private Capital Solutions. US Core Bond Fund and US Large Cap Equity Fund returns are based on 10-year annualized total returns of various Morningstar categories (specified above), as of 12/31/25. The remaining asset class returns are based on various MSCI Private Capital Solutions peer groups (specified below) and consist of since inception or 10-year fund internal rates of return (IRR) within the trailing 10-year period as of 12/31/25.

Dispersion of returns, United States (USD)Top quartile, median, low quartile; based on returns over a 10-year window

US large cap equity funds

US core bond funds

US private debt

US non-corereal estate

US private equity buyout

US venture capital

US Core Bond Funds: US Fund Intermediate Core Bond, US Fund Intermediate Core-Plus Bond US Large Cap Equity Funds: US Fund Large Blend, US Fund Large Value, US Fund Large Growth

Morningstar categories

US Private Debt: MSCI Private Capital Solutions US Private Debt funds US Non-Core Real Estate: MSCI Private Capital Solutions US Real Estate Value-Added funds, MSCI Private Capital Solutions US Real Estate Opportunistic funds US Private Equity Buyout: MSCI Private Capital Solutions US Private Equity Buyout funds US Venture Capital: MSCI Private Capital Solutions US Venture Capital funds

MSCI Private Capital Solutions peer groups

2.4

1.6

11.0

14.0

12.2

5.3

10.9

-4.0

21.7

3.2

17.8

-2.7

1Q = 25th percentile

Median = 50th percentile

3Q = 75th percentile

Annualized performance (%) as of 07/31/2026

Franklin Quotential Balanced Growth Portfolio – Series O – CAD

1 Year

3 Years

5 Years

10 Years

15 Years

Performance inception 08/19/2002

16.67

14.27

8.46

8.26

8.24

7.83

Performance data represents past performance, which does not guarantee future results. Current performance may differ from figures shown. Investment return and principal value will fluctuate with market conditions, and you may have a gain or loss when you sell your units.

Important legal information This material is intended to be of general interest only and should not be construed as individual investment advice or a recommendation or solicitation to buy, sell, or hold any security or to adopt any investment strategy. It does not constitute legal or tax advice. The views expressed are those of the investment manager, and the comments, opinions, and analyses are rendered as at publication date and may change without notice. The information provided in this material is not intended as a complete analysis of every material fact regarding any country, region, or market. Commissions, trailing commissions, management fees and expenses all may be associated with mutual fund investments. Please read the prospectus before investing. The indicated rates of return are the historical annual compounded total returns including changes in share or unit value and reinvestment of all dividends or distributions and do not take into account sales, redemption, distribution or optional charges or income taxes payable by any security holder that would have reduced returns. Mutual funds are not guaranteed, their values change frequently and past performance may not be repeated. Franklin Templeton and Franklin Templeton Canada are a business names used by Franklin Templeton Investments Corp.

1.00 0.80 0.60 0.40 0.20 0.00 -0.20 -0.40 -0.60 -0.80 -1.00

36m rolling correlation (non-excess return) of FTSE Canada All Government Bond to S&P/TSX Composite

Stock/bond correlations as of June 29, 2026

1982

01/03/1981 - 29/02/1984

01/05/1982 - 30/04/1985

01/07/1983 - 30/06/1986

01/09/1984 - 31/08/1987

01/11/1985 - 31/10/1988

01/01/1987 - 31/12/1989

01/03/1988 - 28/02/1991

01/05/1989 - 30/04/1992

01/07/1990 - 30/06/1993

01/09/1991 - 31/08/1994

01/11/1992 - 31/10/1995

1996

01/03/1995 - 28/02/1998

01/05/1996 - 30/04/1999

01/07/1997 - 30/06/2000

01/09/1998 - 31/08/2001

01/11/1999 - 31/10/2002

01/01/2001 - 31/12/2003

01/03/2002 - 28/02/2005

01/05/2003 - 30/04/2006

01/07/2004 - 30/06/2007

01/09/2005 - 31/08/2008

01/11/2006 - 31/10/2009

01/01/2008 - 31/12/2010

01/03/2009 - 28/02/2012

2026

01/05/2010 - 30/04/2013

01/07/2011 - 30/06/2014

01/09/2012 - 31/08/2015

2013

01/01/2015 - 31/12/2017

01/03/2016 - 28/02/2019

01/05/2017 - 30/04/2020

01/07/2018 - 30/06/2021

01/09/2019 - 31/08/2022

01/11/2020 - 31/10/2023

01/01/2022 - 31/12/2024

Note:

1982

1996

2026

2013