Asset allocation is very much on people's minds. In this final quarter of the year, thoughts can often turn towards how wealth managers and private banks deploy clients’ money, and we have carried a raft of commentaries about the pros and cons of investing in the US, the impact of a devaluing dollar; shifts to emerging markets; the case for Japan, or India, and Europe. There’s also a fair amount of rumination about whether the old “60/40” equity/bond balanced portfolio makes much sense when – as has happened in recent years – stocks and bonds move in lockstep. And nowadays we have the rise of private market investing and moves even in the mass-affluent/retail space to hold private market assets. Joe Public, meet the Yale Model.

Another important topic that has caught more attention recently is “concentration risk”. When the “Magnificent Seven” US Big Techs account for as much as 34 per cent of the market cap of the S&P 500, as was the case in August, it heightens the danger that a reversal could hit those who think they’re diversified in holding a whole index. This leads also to concerns about whether investors’ advisors fully grasp what sort of indices they are exposed to, and how the reconstitution of indices can also lead to people to miss out on rises in values of certain firms. (See an article here.)

The asset allocation stance taken by a high net worth or ultra-HNW individual and family is clearly linked to risk tolerance and their goals. That tolerance might depend on whether the investors are still beneficial owners of an operating business that generates cash or rely on a pool of liquid assets after a firm has been sold. Asset allocation can also be fine-tuned for individual family members - what’s good for Mum and Dad if they are retired is not so appropriate for their adult children.

It is not just asset allocation that is important in thinking about where returns come from, but asset “location” is significant too. Remember, it is the after-tax returns that count. Fears that taxes such as capital gains could rise have, along with other forces, put the location of investments into the limelight to an extent that appears to be relatively new by the standards of recent years. For instance, getting details right – such as understanding whether a fund’s share class has a particular status, incurring either capital gains or income tax, can be crucial.

Laura Cooper, global investment strategist at , is also going against the "sell the US" narrative.

"We think full-year 2025 earnings estimates may be understated in analyst expectations by about $9, based on the historical relationship implied by the run rate of the year’s earnings. This may be because analysts are hedging downside economic surprises due to the fallout from future tariffs. We think data slogs through, which provides room for upside earnings surprises in the second half of 2025. This would not only lead to further earnings increases into 2026 but also suggest that current P/E valuations may be overstated. It is the basis of why we are looking to add to US equity exposure for the second half of this year.

This publication asked Caron for some tactical as well as strategic asset allocation views.
 
"The second half of 2025 will resolve the uncertainty stemming from first half of the year surrounding tariffs, budget and tax policies in the US. It remains to be seen if the fallout from tariff policies leads to a more pronounced slowing of economic activity and higher inflation - the stagflation scenario - or if the economy muddles through without a recession. Our view is the latter. The resolution of the US budget and tax plan could be a tailwind for economic activity as it may add stimulus through accelerated depreciation, increased capital expenditure (cap-ex) and further deregulation that shifts the engine of growth from the government to the more productive private sector. 

“We expect more productive growth over the next sis months. An underappreciated change in policy is the reduction in Federal outlays/spending that is starting to take hold. Post Covid, government spending and policies influenced and crowded out private sector activity from employment growth to Green initiatives that influenced corporate spending and investment. This change in policy is hard to measure immediately but instead shows up in business investment and , which, in turn, feeds into GDP. The big difference is that it is driven by the private sector, not public, such that invested money has a higher multiplier effect,” Caron said. 

Asset allocation approaches are changing in a variety of sectors, including among philanthropists.

Most charities expect to pivot more of their capital towards active investments amid volatile markets and shift their investment portfolios towards equities and alternatives over the next two years, according to interviews with senior charity executives conducted for Rathbones. The UK wealth manager talked to 100 UK charity board directors, finance directors, investment managers and investment directors with a collective £3.7 billion of stock market related investments. The survey found that 87 per cent expect their active investment allocations to increase, either slightly (49 per cent) or dramatically (38 per cent) over the next three years.