Make room for ALLW Reallocate from equities, bonds—or both—to improve diversification and rebalance portfolio risk
The State Street® Bridgewater® All Weather® ETF (ALLW) is a diversified, multi-asset exchange traded fund (ETF) designed to balance risk across assets with different sensitivities to growth and inflation.
Spanning global equities and bonds, plus diversifiers like inflation-linked bonds, commodities, and gold, ALLW helps investors move from a concentrated portfolio to a more balanced and diversified one.
How can you fund an investment in ALLW?
There are three ways investors typically fund an allocation to ALLW, depending on their starting portfolio and objectives.
1. Fund ALLW from equities to reduce concentration risk
In a traditional 60/40 portfolio, most of the risk—often more than 90%—comes from equities.1 That’s worked well in periods of strong growth and stable-to-low inflation. But it can leave portfolios exposed when conditions change.
Because every $1 invested in ALLW delivers roughly $1.80 of diversified market exposure, reallocating from equities doesn’t simply reduce equity exposure. It adds diversification—across asset classes and geographies—while maintaining meaningful equity allocations.
Potential portfolio effects:
- Similar potential long-term return profile, lower overall portfolio risk
- Improved geographical diversification and reduced US equity concentration
- Added inflation-sensitive diversifiers
Since ALLW was launched in March 2025, a 50/40/10 allocation, rebalanced monthly, would have produced a ~17.1% return, equivalent to an example of the traditional 60/40 portfolio, but with lesser volatility (8.5% versus 9.0%) than the 60/40, also rebalanced monthly.2 And the return-to-risk ratio would have improved from 1.94 to 2.02 (Figure 1).3
2. Fund ALLW from bonds to enhance return efficiency
Government bonds tend to be low volatility but also offer lower returns than equities. ALLW allows investors to maintain a meaningful fixed-income allocation in a more globally diversified and inflation-aware way, with exposure to assets like inflation-linked bonds, commodities, and gold.
This can be particularly valuable in environments where growth is challenged and inflation is higher or more volatile than expected.
Potential portfolio effects:
- Improved return-to-risk efficiency relative to owning just traditional bonds as volatility dampeners
- Reduced sensitivity to unexpected inflation
- Broad global diversification within fixed income
Since ALLW was launched in March 2025, a 60/30/10 allocation, rebalanced monthly, would have produced a ~19.3% return, higher than the 60/40’s 17.5% with just slightly higher volatility (9.6% versus 9.0%), rebalanced monthly.4 This would have resulted in an improved return-to-risk ratio of 1.94 to 2.01 (Figure 1).5
3. Fund ALLW from equities and bonds to balance risk exposure
Sourcing from both equity and bond allocations can help portfolios remain anchored in broad asset classes but with an added emphasis towards natural diversifiers. An investor with a 60/40 portfolio who reallocates 10% proportionally to ALLW would end up with 54% equities, 36% bonds, and 10% ALLW.
Yet, this 54/36/10 portfolio results in nearly the same weights to broad stocks (~60%) and bonds (38% in US nominal bonds and ~2% in non-US nominal bonds), but with more regional and economic regime diversification—as well as exposure to commodities, gold, and inflation-linked bonds.
Potential portfolio effects:
- Greater exposure to real asset diversifiers
- Broader geographic balance across both equities and bonds
- Less concentration, but more exposure
ALLW’s correlation metrics illustrate the potential diversification benefits of including ALLW in this way. Since inception, ALLW has a 0.65 correlation to global equities, 0.57 correlation to global bonds, and a 0.64 correlation to the 60/40 portfolio.6
The capital efficiency of ALLW also leads to more asset class exposure for the same capital committed. For example, the 56/34/10 portfolio has 108% of total notional exposure to assets (Figure 2).
Building more balanced, diversified portfolios
Making room for ALLW is less about replacing equities or bonds—and more about improving how they work together.
By introducing diversified exposures across growth, inflation, and real assets, ALLW can help rebalance portfolio risk, enhance resilience, and support more consistent outcomes across changing market environments.