How life stage influences the role of alternatives

For decades, conventional wealth advice has followed a simple formula: own more equities when you are young, gradually shift to bonds as you age.¹

It is neat. It is intuitive. It is also incomplete.

In Singapore today, an accredited investor’s financial journey rarely follows a textbook glide path. You may be planning a property upgrade, funding overseas education, supporting ageing parents, protecting purchasing power against persistent inflation or managing liquidity across multiple commitments.

A portfolio built solely on public stocks and bonds often lacks the flexibility to address these overlapping demands.

Private markets were not designed to replace public markets. They were designed to solve different problems.  More importantly, a private markets allocation should not remain static. It should evolve with the realities of each decade.

Building a wealth engine from 25 to 40 through the illiquidity premium

Investors in their 20s and 30s possess one structural advantage that cannot be manufactured later: time.

With decades of earning capacity ahead, this cohort is positioned to benefit from assets that require patience. Yet in practice, many maintain substantial balances in low yielding liquid accounts while waiting for future milestones.
Holding liquidity for near term needs is prudent. Holding excessive liquidity for prolonged periods may create opportunity cost.²

Private equity and venture capital allow investors to participate in the growth of companies long before they access public exchanges. Historically, a significant share of enterprise value creation has occurred prior to IPO.³ These investments typically require multi-year commitments. That illiquidity is not a flaw but a feature.

Academic research has documented the existence of an illiquidity premium, where investors may be compensated for committing capital over longer horizons.⁴ For investors with long runways, allocating a portion of capital to long duration growth strategies can support the compounding of wealth during peak earning years.

⚖️ Balancing income stability and portfolio defense from 40 to 55

Between the ages of 40 and 55, the financial profile of an investor in Singapore often shifts toward a peak in responsibility. This phase is characterised by the dual pressure of managing career obligations while funding the higher education of children and the healthcare needs of elderly parents. Because these costs are often significant and non-negotiable, the priority naturally moves away from aggressive growth toward protecting the existing wealth base.

Public equities remain important for long-term growth. However, portfolio volatility during this phase can introduce sequence of returns risk, particularly when withdrawals are required during market downturns.⁵

Private credit and real assets may serve a structural role here.

Private credit strategies typically lend directly to companies and often sit higher in the capital structure than equity. This positioning may provide downside protection relative to common shares, though risk remains. ⁶

Real estate and infrastructure assets may generate periodic distributions, which can support cash flow needs without requiring the sale of core growth holdings.

Yield-focused structured products, such as fixed coupon notes, may also play a role in this context by providing regular coupons, with outcomes linked to the performance of the underlying assets.

Importantly, alternatives can reduce portfolio correlation to public markets, improving diversification when thoughtfully implemented.⁷

The objective in this decade is not aggressive expansion. It is balance. Growth continues, but capital preservation and income stability begin to matter more.

⏳️ Transitioning to sustainable distribution from 55 and above

For investors aged 55 and above, the focus shifts to creating a steady and sustainable income stream.  
Singapore’s CPF LIFE scheme provides a foundational income layer.⁸ For many accredited investors, however, it does not fully replace pre-retirement lifestyle expectations.

Relying solely on dividend paying bank stocks or REITs may create concentration risk, particularly within a single economy and interest rate environment.

Private market income strategies, including global infrastructure and commercial real estate, may offer diversified yield sources. Many infrastructure assets operate under long term contractual or regulated revenue models, which can provide cash flow visibility, although returns are not guaranteed.⁹

Some private market strategies incorporate inflation-linked mechanisms, helping preserve purchasing power over time.¹⁰

Some investors may also consider instruments such as commercial paper which can offer an additional source of income and diversification within a broader portfolio.

The goal at this stage is not maximising returns. It maintains financial resilience while preserving capital for legacy and intergenerational planning.

🔍 Evaluating your portfolio for the next decade

Understanding where your current allocation sits within your life cycle is a vital part of long-term wealth management. You can explore a range of private market and alternative investment opportunities, including open ended funds, structured products and short-term debt by visiting the ADDX platform.

References:

¹ Manulife Singapore – How to Start Investing
² Vanguard – The Case for Staying Invested
³ McKinsey & Company – Global Private Markets Review 2024
⁴ Ang, Papanikolaou & Westerfield – Portfolio Choice with Illiquid Assets (Journal of Finance)
⁵ CFA Institute – Sequence of Returns Risk
⁶ Preqin – Global Private Debt Report
⁷ BlackRock Investment Institute – Private Markets and Portfolio Construction
⁸ CPF Board Singapore – CPF LIFE Overview
⁹ OECD – Infrastructure as an Asset Class
¹⁰ Brookfield – Infrastructure and Inflation Hedging

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