Portfolio Construction Pulse Summer 2026
Diversifiying with conviction
Our semiannual survey of advisor data suggests role-specific portfolio impact is driving allocations to stocks, bonds, and alternative investments.
As of June 30, 2026
Advisors are diversifying with greater conviction as they shift from the pursuit of broad beta to role-specific investment allocations.
Exposure to equities favors international value, while fixed income embraces flexibility and shorter duration. Alternatives are evolving from satellite to strategic positions, and the use of active exchange-traded funds is accelerating.
Portfolio Impact drives model decisions
Equity exposure is moving toward international, with an emphasis on value
Exposure to international value eclipsed international growth in a dramatic reversal from prior years.
Alternatives are becoming a strategic allocation
Alternatives now represent 7.6% of advisor models, climbing steadily higher from 5.1% two years ago.
Fixed income is shifting toward flexibility and shorter duration
Advisors continue to show a preference for multisector, nontraditional, and short-term strategies.
ETFs are approaching the 40/40 club
Nearly 40% of advisor models are composed of exchange-traded funds (ETFs), with 38.9% of ETFs being actively managed.
Source: Trailing 12-month data for moderate-risk models in the T. Rowe Price Client Investment Platform (CIP) database as of June 30, 2026.
- 2026 Midyear Market Outlook Five shifts reshaping markets
A sequence of geopolitically driven shocks in 2026 has collided with surging artificial intelligence (AI) investment, robust corporate earnings, and solid U.S. economic growth.
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Alternatives evolve toward a more strategic building block, while international value stocks gain traction
Advisors shifted into international stocks, representing the largest allocation shift over the last 12 months. International value gained significantly, increasing from 15% of a typical international sleeve to 25.4%. International blend and emerging markets were also in the top five allocation gainers. Within alternatives, derivative income and commodities gained traction. Allocations to large-cap blend strategies fell the most and served as a funding source for more intentional and diversified exposures. Fixed income allocations pivoted away from core mandates to more flexible multisector and nontraditional strategies, while duration decreased amid concerns over rising interest rates.
Average allocation: 12‑month change
- Key Takeaway
Advisors are building models more deliberately and more intentionally, with tilts toward more flexible fixed income mandates, international value equities, and derivative income. Exposure to commodities increased amid heightened geopolitical and inflation concerns.
Strategies to Consider
Advisors focus on international value and U.S. growth
Advisors continued to broaden equity exposure in the first half of 2026, reducing the U.S. share of model portfolios and significantly increasing international allocations. The shift was concentrated in developed large‑cap equities, with a pronounced rotation toward international value. Within U.S. equities, allocations moved away from blend toward both growth and value.
U.S. stocks by market capitalization1
1 As a percentage of U.S. equities.
- Key Takeaway
Within equity allocations, international value and U.S. growth stocks gained share.
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Flexibility remains a focus in fixed income
Advisors continued to reshape their fixed income portfolio sleeves. Core exposure declined as more flexible diversifiers gained share, led by multisector and nontraditional bond strategies. Advisors also maintained materially shorter duration than the broad bond benchmark, signaling continued caution around interest rates and inflation.
Fixed income allocations
1 Diversifiers include fixed income strategies that offer diversification to traditional core fixed income. This includes bank loans, convertibles, emerging markets bond, emerging markets local currency bond, high yield bond, high yield muni, multi‑sector bond, nontraditional bond, preferred stock, and world bond. For select T. Rowe Price multi‑asset portfolios, the firm’s nontraditional bond fund is used as a liquid cash‑plus alternative that is carved out of the cash position in fixed income allocations.
2 Bloomberg U.S. Aggregate Bond Index.
- Key Takeaway
Advisors diversified their fixed income portfolios away from core bonds toward multisector, emerging markets, and nontraditional strategies.
Strategies to Consider
Alternatives evolve into an emerging strategic portfolio building block
Advisors are increasingly turning to alternatives to fill a more strategic role within models. There is also more intentionality in placements, with a focus on addressing concerns such as inflation hedging, risk dampening, diversified sources of return, pulling from both equities and fixed income. The overall mix of alternatives moved toward outcomes that are easier to explain to clients, even when the strategies retain meaningful equity sensitivity.
Source: Trailing 12-month data for moderate-risk models in the T. Rowe Price Client Investment Platform (CIP) database as of June 30, 2026.Please note that our data capture publicly traded vehicles and do not capture private markets such as private equity, private credit, private real estate, or private infrastructure.
Alternative allocations1
Trailing 12-month periods as of June 30
Source: Moderate-risk models in the T. Rowe Price Client Investment Platform (CIP) database.
1 As a percentage of total alternatives.
- Key Takeaway
Alternatives were included in 68% of moderate risk models and now account for 7.6% of the average allocation.
ETF adoption accelerates and continues to get more active
ETF allocations rose 5.6 percentage points to 39.9% of the average moderate model, and 88.2% of models now use at least one. The role of ETFs has expanded beyond passive beta to active management, strategic beta, thematic and sector exposures, derivative income, and fixed income. Vehicle selection is increasingly driven by portfolio outcomes, potential tax advantages, trading flexibility, and operating preferences.
Source: Trailing 12-month data for moderate-risk models in the T. Rowe Price Client Investment Platform (CIP) database as of June 30, 2026.
Active ETFs (as a % of total ETFs)
Trailing 12-month periods as of June 30, 2026
Source: Moderate-risk models in the T. Rowe Price Client Investment Platform (CIP) database.
- Key Takeaway
ETFs now account for 39.9% of the average moderate-risk model—a gain of 16.3% over last year. Growth in active ETFs was even stronger, which grew 25.1% and now account for 38.9% of total ETF allocations.
Strategies to Consider
Advisors maintain broad diversification
Advisor models were broadly diversified across asset classes and categories, with 17 holdings. Alternatives established significant presence in the models, with over 7% allocation on average.
Source: Trailing 12-month data for moderate-risk models in the T. Rowe Price Client Investment Platform (CIP) database as of June 30, 2026.
Allocation mix: Active, passive, and strategic beta
- Key Takeaway
Model diversification was unevenly distributed across categories, with U.S. and international small‑cap and international value equities showing lower chance of usage.
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Important Information
Risk Considerations
All investments are subject to market risk, including the possible loss of principal. Active investing may have higher costs than passive investing and may underperform the broad market or passive peers with similar objectives. Diversification cannot assure a profit or protect against loss in a declining market. Alternative investments are speculative investments that typically involve aggressive investment strategies. In addition, alternative investments may be illiquid, difficult to value, and not subject to the same regulatory requirements as mutual funds. These factors may increase the fund’s liquidity risks and risk of loss.
Mid‑caps generally have been more volatile than stocks of large, well‑established companies.
Small‑cap stocks generally have been more volatile in price than large‑cap stocks.
International investments can be riskier than U.S. investments due to the adverse effects of currency exchange rates, differences in market structure and liquidity, as well as specific country, regional, and economic developments. These risks are generally greater for investments in emerging markets.
ETFs are bought and sold at market prices, not net asset value (NAV). Investors generally incur the cost of the spread between the prices at which shares are bought and sold. Buying and selling shares may result in brokerage commissions, which will reduce returns.
Past performance cannot guarantee future results. All investments involve risk. The charts and tables are shown for illustrative purposes only.
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