Traditional portfolio diversification isn’t cutting it anymore. Here’s where to pivot, says this $624 billion fund manager.

Allspring Global Investments, which manages roughly $624 billion, argues that traditional diversification — the classic mix of stocks and bonds — is no longer delivering the cushion investors have historically expected. The firm suggests investors consider adapting their strategies to include more liquid alternatives, a category of assets that can be bought and sold relatively easily while offering return sources that may not move in step with mainstream markets.

The logic rests on correlation. When stocks and bonds fall together, a portfolio split between them offers less protection than its structure implies. Liquid alternatives — which can include strategies such as long-short equity or managed futures — aim to diversify that risk by drawing on different drivers of return.

What to watch: whether correlations between stocks and bonds stay elevated, and how liquid alternative funds perform on fees, liquidity terms and transparency. These vehicles vary widely in complexity and cost, so the case for them depends on whether they genuinely reduce portfolio swings rather than simply adding layers of exposure.