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Stealth Concentration Risk: How Diversified Are You, Really?

At a glance

  • Portfolios that appear diversified by asset class may share the same underlying exposures across public and private markets.
  • Private-market growth is raising the stakes for underwriting, liquidity, manager selection and suitability.
  • Total-portfolio resilience depends on better look-through data, connected teams and governance built around shared objectives.

At a private roundtable at Invest New York on March 4, 2026, Bloomberg and Marsh convened asset owners, investment managers, pension leaders and advisers to examine how portfolios can remain resilient in a fast-changing global economy under Chatham House Rule.
The discussion centered on a deceptively simple question: how diversified is a portfolio when equities, infrastructure, private markets and credit are increasingly exposed to the same themes?

Risk no longer respects asset-class boundaries

Traditional portfolio construction allocates across equities, fixed income, infrastructure and private markets. But those labels can conceal common drivers beneath apparently distinct holdings.

Infrastructure illustrates the point. It may provide stable income and inflation protection, yet assets supporting data centers, power generation and the AI buildout can carry the same underlying exposure as technology holdings elsewhere in the portfolio. As Niall O’Sullivan, Global CIO, Mercer (a Marsh business), put it: “You’ve actually picked up the same risk in a place that you thought you were getting diversification.”

Investors therefore need greater look-through—mapping holdings by economic driver, theme and cluster, then testing how those exposures may behave when historical relationships break down.The question is not how many asset-class buckets a portfolio contains, but whether its components will respond differently under pressure.

John Q. Doyle, President and CEO, Marsh.

Private markets demand sharper discipline

Private markets remain an important source of return and diversification, but participants highlighted a more demanding risk environment, particularly in private credit.

Credit offers a capped return with meaningful downside, placing greater weight on underwriting, covenants and manager experience. Rapid growth has also brought in participants who have not yet managed through a full credit cycle.

Liquidity matters just as much. Investors need to understand not only the asset, but also the investor base: who can redeem, when they may need capital and whether those demands could become correlated during stress.

These questions become more acute as private-market products move further into wealth platforms and defined-contribution plans. Investors who consider themselves long-term can become short-term sellers during a shock, while valuation lags and redemption constraints may be poorly understood.

The test is whether a specific allocation solves a defined portfolio problem and matches the investor’s liquidity needs, time horizon and ability to absorb volatility.

Fundamentals endure, but assumptions must be challenged

Participants repeatedly returned to the assumptions underpinning investment decisions: stable correlations, predictable liquidity, durable recurring revenues and the belief that institutions will always behave as long-term investors.

Technology may support growth while changing the identity of winners and losers more rapidly, increasing dispersion across companies, managers and parts of the capital structure. Yet abandoning assumptions altogether is not workable. Cash flows, earnings, valuation and disciplined underwriting remain essential.

The task is to preserve those fundamentals while remaining humble about the relationships built around them. That requires continuous review across short-, medium- and long-term horizons, as well as explaining portfolio objectives through fundamental value and purpose rather than short-term comparison with a familiar benchmark.

Total-portfolio thinking needs a connected operating model

Managing hidden exposures across public and private markets requires teams to work toward one portfolio objective rather than optimize separate silos. Information from private markets may change the view of public equities, credit or infrastructure—and vice versa.

This is difficult without consistent data. Many institutions still lack standardized look-through on holdings, exposures and returns, while public- and private-market systems often do not communicate with one another.

Participants did not expect one platform to solve the problem. A more practical model is open architecture: connecting specialized systems through APIs and AI-enabled workflows while keeping human judgment in the loop. Governance may not need to be rebuilt from scratch, but workflows, transparency and decision rights must evolve.

What resilient portfolio construction looks like

The discussion surfaced four practical priorities:

  • Look through labels: Map exposures by underlying driver across public and private holdings.
  • Stress the relationships: Test changing correlations, liquidity and transmission channels rather than replaying history.
  • Underwrite the full structure: Assess managers, covenants, investor behavior, redemption terms and suitability.
  • Connect governance and data: Align teams around one portfolio objective and build the transparency needed for informed decisions.

Resilient portfolios will not be defined by the number of buckets they contain. They will be defined by how well investors understand what they truly own, how those exposures may interact under pressure and whether their governance systems can respond when the past is no longer a reliable guide.

Marsh, who was a sponsor of Bloomberg Invest New York, is the founding Co-Chair of the Bloomberg New Economy Competitive Resilience Coalition, a private sector-driven initiative helmed by a collective of forward-thinking global leaders to help today’s organizations tangibly strengthen competitive resilience: the ability to anticipate disruption, make better decisions under uncertainty, and sustain growth and competitiveness through periods of seismic change. Learn more at bloombergneweconomy.com/Competitive-Resilience