BlackRock warns of a "diversification illusion": gold and bonds are failing as safe havens, alternative assets need to be explored

Zhitong Finance learned that BlackRock Investment Institute pointed out that as traditional hedging tools such as bonds and gold no longer provide stable safe haven functions during market volatility, investors urgently need to re-adjust their ideas for diversified asset allocation.

The institution emphasized that a so-called “diversification illusion” is unfolding in real time, driven by the continuous rise in bond yields and heightened geopolitical tensions that are jointly reshaping market dynamics. Since the outbreak of the Middle East conflict, the S&P 500 index has risen by 8%, while Brent crude oil prices have soared by 43%, and the US 10-year Treasury yield has climbed by nearly 60 basis points.

Gold, which has been regarded as a safe haven asset for a long time, has fallen by 15% since the conflict began, partly due to excessively concentrated positions—indicating that even recognized safe haven tools may become unreliable.

In its analysis, BlackRock stated: “Traditional portfolio diversification is facing challenges under current conditions, highlighting the need to seek a broader range of diversification sources.”

The institution recommends that investors “further diversify diversified portfolios,” expanding their focus beyond traditional assets. For strategic investment horizons of five years or longer, BlackRock prefers hedge funds and private markets, considering that the performance of these alternative assets is less affected by overall market volatility and relies more on managers’ skills.

Despite many uncertainties facing the market, BlackRock still maintains a preference for risk assets, citing strong corporate earnings growth and the AI investment theme, which will provide solid support for risk assets.