The 60/40 default

For decades the standard mix has been about 60% stocks for growth and 40% bonds for income and stability. It lasted because both are still core building blocks.

“Roughly 60% in stocks for growth and 40% in bonds for income and stability.”

The menu got longer

High-net-worth investors, family offices and advisers now reach private credit, real estate, private equity, infrastructure and direct energy, exposures that sit outside public markets.

A better question

The claim is not that 60/40 stopped working. It is that investors can now ask what else might complement it.

“It means investors now have the opportunity to ask a broader question: What other assets may complement it?”

Many funds, one engine

A pile of funds can still be one bet. Stocks and bonds react to the same forces: rates, inflation, growth expectations and market mood.

“Owning multiple funds doesn't always mean a portfolio is truly diversified.”

2022 made the point

That year stocks and bonds fell together, which is the case for judging diversification by what drives value rather than by how many line items you hold.

Different value drivers

Real estate runs on rents and property values. Private credit runs on contractual interest. Infrastructure runs on long-term demand for essential services.

Energy's driver

Direct oil and gas is tied to something else again: developing, producing and selling energy itself.

A stock is still a stock

Shares in a public energy company move with the broad market, sentiment, analyst calls, rates and company news, not just with the barrels in the ground.

“A public oil and gas stock is still a stock.”

Closer to the asset

In a direct deal, investor capital may go to buying acreage, drilling and completing wells, bringing production online and developing reserves.

Capital with a job

The aim is not to hold acreage and hope it appreciates. Money is spent to move an asset from undeveloped potential toward actual production.

“The capital has a job.”

Drilling buys information

Before drilling, value rests on geology and nearby wells. After drilling and completion there is more data. After production starts there is a real performance record.

“drilling can be a value-creation process, not simply an expense”

Layers of potential value

A well that works can throw off current production, monthly cash flow, added proved reserves, room for further development and value if the assets are later sold.

Demand is not theoretical

Transport, manufacturing, agriculture, petrochemicals, power generation and data centers all run on reliable energy supply.

“The world continues to require enormous amounts of energy.”

Wells decline, always

Production depletes on its own, so fresh capital and new drilling are needed just to hold output flat. That keeps the industry hungry for investment.

“Existing wells decline, which means new capital and new drilling are continually required simply to replace lost production.”

Tax can move the math

Depending on structure, some drilling costs may qualify for intangible drilling cost deductions, and producing properties may allow depletion deductions over time.

“I don't believe anyone should make an investment solely for a tax deduction.”

Start with the rock

Ask what is in the ground, whether nearby wells produced from the same formations, what the development plan is and where the money goes. Projections only echo their assumptions.

“I've always preferred to start with the asset rather than the spreadsheet.”

Bet on the operator

Drilling choices, completion design, cost control, title work, marketing and timing all decide the result. Ask the operator for milestones and an exit path.

“Oil and gas isn't a passive business from the operator's perspective.”

Patient money only

These are private deals with real risks: illiquidity, commodity price swings, drilling failure and loss of capital. Suits investors with liquidity elsewhere and a long horizon, not a replacement for stocks or bonds.

“An investor may not be able to sell an interest with the click of a button.”