Eugene Ng on the Death of 60-40: Why Traditional Portfolio Theory is Obsolete

“The tradition of popular 60-40 is not going to play out. It’s not going to work, especially with three-quarters of the bonds yielding a negative yield. That’s not going to work for any corporate treasury,” declares Eugene Ng, Head of Business Development for APAC at Gemini, with the conviction of someone who has witnessed the breakdown of fundamental investment principles firsthand. Having spent over 15 years trading derivatives across Barclays, Deutsche Bank, and Citibank before building institutional crypto adoption across Asia, Eugene Ng possesses a unique perspective on how traditional portfolio theory—the bedrock of modern finance for decades—has become not just inadequate but actively destructive to wealth preservation.

Ng’s pronouncement reflects more than theoretical concern. His experience building Gemini’s Asian operations, where the region became the fastest growing with a $50-75 million revenue pipeline, has provided him front-line exposure to how sophisticated institutional investors are abandoning time-tested allocation models in search of sustainable returns. The 60-40 portfolio allocation that dominated investment strategy for generations—60% stocks, 40% bonds—has become a relic of a bygone era where bonds actually provided yield and diversification benefits.

“When I first spoke with institutions six months ago, the response was very lukewarm,” Ng recalls about crypto adoption. “Fast forward today, they’re actually sending us a lot of inquiries. It’s all in-bound.” This institutional transformation isn’t driven by speculative fever—it’s driven by mathematical necessity as traditional portfolio construction fails to generate adequate returns or provide meaningful diversification.

The Mathematics of Portfolio Failure

Ng’s derivatives trading background across global investment banks provides him sophisticated understanding of risk-return dynamics that traditional portfolio theory was designed to optimize. The 60-40 model assumed that bonds would provide stable income while offering negative correlation to equity markets during downturns. Both assumptions have collapsed under the weight of central bank intervention and structural economic changes.

“Three-quarters of the bonds yielding a negative yield” represents more than inconvenience—it represents fundamental breakdown of the asset class that provided portfolio ballast for generations. When government bonds offer negative real returns while central bank policies inflate asset bubbles across equity markets, the mathematical foundation of diversified portfolio construction crumbles.

Ng’s traditional finance experience helps him recognize how this breakdown affects different types of institutional investors. Corporate treasuries, pension funds, and insurance companies that built business models around predictable bond yields face existential challenges when their core assumption—that bonds generate positive real returns—no longer holds. The search for yield has pushed these institutions toward increasingly risky investments, defeating the original purpose of diversified allocation.

The correlation problem compounds the yield problem. During market stress, bonds have increasingly moved in tandem with equities rather than providing the negative correlation that justified their portfolio role. Ng’s derivatives expertise reveals how this correlation breakdown eliminates the diversification benefits that made 60-40 allocation mathematically sensible.

Asian Portfolios Lead the Alternative Allocation Revolution

Ng’s regional expertise provides insight into how different markets are adapting to portfolio theory’s obsolescence. “40% of the average Asian portfolio actually sits in cash and alternative assets. Now, that is a significant chunk of any portfolio that is essentially in play for cryptocurrency, digital assets, alternative assets,” he observes, highlighting how Asian investors have already moved beyond traditional allocation models.

This Asian approach reflects cultural comfort with alternative investments that extends back generations. While Western institutional investors often treat alternatives as portfolio additions, Asian wealth management has always incorporated real estate, commodities, and private investments as core allocation categories. This cultural foundation positions Asian investors to adapt more readily to post-60-40 portfolio construction.

Ng’s experience building institutional relationships across Australia, Hong Kong, and India reveals how this alternative allocation mindset creates opportunities for innovative asset classes. Asian institutions don’t need to be convinced that alternatives deserve portfolio space—they need to be convinced that specific alternatives offer superior risk-return characteristics to existing holdings.

The 40% alternative allocation that Ng identifies represents massive capital seeking new homes. Traditional alternatives like real estate and commodities face their own challenges from monetary policy distortions, creating demand for truly uncorrelated assets that can provide both diversification and real returns.

The New Allocation Paradigm: Small Positions, Big Impact

Rather than advocating wholesale abandonment of traditional assets, Ng promotes a more nuanced approach that acknowledges both the breakdown of old models and the nascent nature of new alternatives. “So having a small allocation whether there is 0.1% to 5%, it all makes sense. And we are starting to hear and have that sort of conversations with a lot of different persons,” he explains.

This graduated approach reflects sophisticated understanding of how institutional portfolios actually evolve. Pension funds and corporate treasuries cannot immediately reallocate hundreds of billions from bonds to crypto assets, but they can begin meaningful experimentation with small allocations that provide outsized portfolio impact.

Ng’s derivatives background helps him recognize how small allocations to uncorrelated assets can dramatically improve portfolio risk characteristics. Even 1-2% allocation to truly uncorrelated assets can reduce portfolio volatility while potentially enhancing returns—exactly the outcome that traditional 60-40 models promised but can no longer deliver.

The institutional conversations Ng describes represent fundamental shift in investment thinking. “The type of conversations, a lot deeper, a lot more thoughtful,” he notes, describing how portfolio allocation discussions have evolved from mechanical application of traditional models to genuine consideration of risk-return optimization in the current environment.

Institutional Evolution: From Lukewarm to Strategic

Ng’s front-line experience building institutional relationships provides unique insight into how sophisticated investors are rethinking portfolio construction. The “180-degrees change” he observes in institutional attitudes reflects not just growing comfort with crypto assets but broader recognition that traditional portfolio theory requires fundamental revision.

“I’m confident that a lot of the CEOs at C-level suite management are asking what’s a digital asset strategy,” Ng notes, highlighting how portfolio allocation has become strategic rather than tactical consideration. This executive-level attention reflects understanding that portfolio construction decisions affect long-term institutional viability, not just short-term returns.

The quality of institutional inquiries has evolved dramatically, with sophisticated discussions about correlation structures, tail risk management, and long-term strategic allocation replacing surface-level questions about crypto volatility. Ng’s traditional finance background helps him recognize that these conversations mirror how institutions approached emerging asset classes like commodities or real estate decades ago.

Asian institutions, with their cultural comfort with alternative investments and longer time horizons, appear particularly well-positioned for this portfolio evolution. Family offices, sovereign wealth funds, and corporate treasuries that already allocate significantly to alternatives can enhance existing strategies through targeted digital asset allocation without abandoning proven investment approaches.

Beyond 60-40: Portfolio Construction for the Digital Economy

Ng’s perspective on portfolio evolution extends beyond simple asset substitution to fundamental reconsideration of how modern portfolios should be constructed. “It’s really increasing the Sharpe ratio of that entire portfolio. And with the innovation that we’re seeing in crypto space today, you don’t just buy bitcoin and hold it, there are so many other use cases,” he observes.

This evolution toward more sophisticated portfolio construction reflects broader technological and economic changes that have made traditional models obsolete. The digital economy requires investment approaches that account for technological disruption, monetary policy extremes, and globalization effects that didn’t exist when 60-40 allocation was developed.

Ng’s experience suggests that successful post-60-40 portfolios will likely combine traditional assets with carefully selected alternatives that provide genuine diversification benefits. This requires sophisticated analysis of correlation structures, liquidity requirements, and risk characteristics that goes far beyond mechanical allocation formulas.

The institutional adoption pattern Ng witnesses suggests that this portfolio evolution is accelerating rather than gradual. As more sophisticated investors demonstrate success with alternative allocation models, competitive pressure will drive broader institutional adoption of post-traditional portfolio construction.

The Future of Institutional Portfolio Management

For Eugene Ng, the death of 60-40 represents opportunity rather than crisis for institutions willing to embrace portfolio innovation. His experience bridging traditional finance and digital assets reveals how sophisticated portfolio construction can generate superior risk-adjusted returns while providing better downside protection than obsolete traditional models.

“I feel like that’s a natural progression in diversification,” Ng concludes, positioning portfolio evolution as logical response to changed market conditions rather than speculative experimentation. The institutions that recognize this reality first will capture competitive advantages as traditional approaches continue failing.

The mathematical foundation of portfolio theory remains sound—the problem is that the assets underlying traditional models no longer exhibit the characteristics that made those models successful. Eugene Ng’s insight points toward portfolio construction that honors diversification principles while adapting to current market realities, creating the foundation for sustainable institutional investment in the digital economy.