For years, the formula for a solid investment portfolio in South Africa was straightforward: a healthy allocation to JSE-listed blue-chip shares, balanced with government bonds and perhaps a bit of listed property. It was our local version of the 60/40 rule, and for a long time, it worked. But let's be honest, the world has changed, and our market has with it. Relying solely on this old playbook today is no longer a strategy for growth; it’s a recipe for stagnation.

For high-net-worth individuals, the path to meaningful wealth preservation and growth now lies beyond the familiar—in the world of private market assets.

When Your Balanced Fund Isn't So Balanced

The core idea behind the old model was simple: when your shares took a knock, your bonds would hold firm, cushioning the blow. It was a classic defence. Recently, however, global inflation and rising interest rates have turned this playbook on its head. We’ve seen markets where both equities and bonds have fallen together, leaving even supposedly "balanced" portfolios exposed.

This isn't just a global phenomenon; it's a reality for us here. A portfolio heavily concentrated in the JSE, even with a mix of bonds, is exposed to local economic headwinds, currency volatility, and the limited growth sectors available on our exchange. To build true resilience, we have to look further afield.

Earning a Premium for Your Patience

The smart money is moving beyond the daily noise of the stock market into private assets—investments in companies, debt, and properties that aren't publicly traded. The key advantage here is what’s known as the illiquidity premium. In simple terms, it's the excess return you can earn by investing for the long term in opportunities that aren't easily bought or sold on a whim.

Think of it as a reward for your patience and foresight. While the public markets are reacting to the latest news cycle, private investments are focused on fundamental, long-term value creation. It's about backing a solid business or property and seeing it grow over years, not days.

The New Cornerstones of a Modern Portfolio

To properly diversify and future-proof a portfolio, we need to add new building blocks alongside our traditional shares. Here are the four cornerstones that sophisticated investors are now focusing on:

1. Private Equity: This is your engine for serious capital growth. It’s about taking a direct stake in unlisted, high-growth companies, both here in South Africa and, more importantly, offshore. Skilled managers don't just provide capital; they bring expertise to help these businesses scale and succeed.
2. Private Credit: This has become the new anchor for reliable income. In essence, you become the bank, providing loans directly to established businesses. In a world of volatile interest rates, this offers strong, predictable yields—often in hard currency—that are secured against the assets of the company, putting you first in line.
3. Specialised Real Estate: The "work from home" trend has shown us the risks of being over-exposed to traditional office and retail property. The real opportunity now is in specialised real estate: logistics warehouses driven by e-commerce, data centres powering the cloud, and medical facilities catering to an ageing population. These assets are plugged into unstoppable global trends.
4. Venture Capital: While a smaller, high-octane part of the portfolio, venture capital gives you a stake in the next big thing. It's about investing in the innovative start-ups—whether in the Cape Town tech scene or in Silicon Valley—that are creating the disruptive technologies of tomorrow.

For savvy South African investors, the conversation has shifted. The question is no longer if you should be investing in private markets, but how to do it smartly. Building a truly robust portfolio today is about blending these powerful new cornerstones with your public market holdings. The challenge, of course, is finding and accessing genuine, high-quality international opportunities. This is precisely why discerning individuals and family offices partner with specialist firms that have the global network and on-the-ground expertise to do the hard yards for them.