BlackRock's retirement chief warns index-only investing is 'evolving' — and your nest egg could pay the price

"There needs to be an evolution away from this being indexed only," Nick Nefouse, global head of retirement solutions at BlackRock, said in a phone interview with Bloomberg (1). "The markets are evolving to a point where there needs to be more oversight."

BlackRock says rising market concentration, geopolitical volatility and longer retirements are forcing investors to rethink their traditional portfolios. The firm manages more than US$14 trillion (C$19.4 trillion) globally (2), with over US$5 trillion (C$6.9 trillion) in exchange-traded fund (ETF) assets through its iShares platform (3). It has a significant presence in Canada, where its BlackRock Canada LifePath® target-date funds are available through all major group retirement recordkeeping platforms.

According to BlackRock, the next generation of retirement investing may look very different from the classic strategy of simply buying an index fund and waiting.

Why BlackRock thinks the index-only strategy is breaking down

BlackRock argues several trends are reshaping the investing landscape.

One of the biggest is market concentration. In recent years, a handful of large technology companies have accounted for an outsized share of stock market gains, leaving major indexes increasingly top-heavy. BlackRock's own data show that by 2025, the top 10 companies in the S&P 500 accounted for roughly 40% of the index's total value — double the historical average and more concentrated than the technology, media and telecommunications bubble peak in 2000 (4). For Canadian investors, this matters: the S&P/TSX Composite Index faces its own concentration problem, with a heavy weighting in financials and energy.

At the same time, global volatility has increased. Geopolitical tensions, inflation cycles and interest-rate uncertainty have created more unpredictable market conditions.

Then there is longevity risk, arguably the most personal challenge. According to Statistics Canada, life expectancy at birth in Canada was 81.7 years in 2023, recovering from pandemic-related declines — a 65-year-old Canadian can expect to live another 19.6 years (males) to 22.2 years (females) (5). That means a retirement portfolio may need to fund 20-plus years of living expenses — and that changes the math considerably.

Instead of focusing solely on building a nest egg, BlackRock says investors may need portfolios designed to deliver a steady stream of income — a potential shift toward what it calls a "paycheque for life" model in retirement.

The big shift: private markets inside retirement accounts

One of BlackRock's proposed solutions is to expand access to private-market investments within retirement plans.

The firm has suggested that future target-date funds could include assets such as private credit, infrastructure investments and private equity alongside traditional stocks and bonds. Private markets have grown rapidly in recent years. Global private equity assets alone reached a valuation of about US$9.9 trillion (C$13.7 trillion) as of October 2025 (6).

BlackRock is exploring retirement products that incorporate these types of investments, potentially bringing institutional-style assets into everyday portfolios — including Canadian group registered retirement savings plans (RRSPs) and defined contribution pension plans.

The shift could benefit asset managers — not just retirees

Not everyone is convinced the move away from index-only portfolios is focused solely on improving outcomes for investors.

Index funds, particularly ETFs, often charge just a few basis points in annual fees. In Canada, broad market index ETFs are typically priced in the 0.10% to 0.20% management expense ratio (MER) range, while most active ETF strategies run 0.75% to 0.90% — and many traditional mutual funds sold through advisors still charge closer to 1.5% to 2% or more (7).

Actively managed funds and alternative investments typically carry higher fees — a difference that compounds dramatically over time. Consider this: a C$100,000 portfolio earning 7% annually for 30 years could grow to about C$739,000 with a 0.1% fee, but only to about C$574,300 with a 1% fee. That C$164,700 gap is driven almost entirely by cost.

Expanding active management could also benefit asset managers themselves, since active funds typically charge higher fees than passive index trackers. The S&P Indices Versus Active (SPIVA) Canada Scorecard for year-end 2024 found that over the 10-year period ending in December 2024, 93% of active Canadian funds underperformed their benchmarks (8). According to the same report, 88.7% of Canadian Equity funds underperformed the S&P/TSX Composite Index in 2024 alone.

Princeton economist Burton Malkiel, author of the investing classic A Random Walk Down Wall Street, has argued for decades that most professionally managed funds are regularly outperformed by broad capitalization-weighted index funds with equivalent risk (9).

What does that mean for everyday Canadian investors?

The takeaway isn't that index funds suddenly stopped working. For younger investors — particularly those building RRSP or tax-free savings account (TFSA) balances — broad-market index ETFs remain a cost-effective core holding.

But as markets become more concentrated and retirements stretch longer, investors approaching or entering their 60s may want to look beyond the traditional 60/40 stock-and-bond mix. Diversification — particularly into income-generating assets — is the key to protecting yourself from market volatility.

One model gaining attention is a 50/30/20 allocation: 50% stocks, 30% bonds and 20% alternative investments.

Here are a few options worth considering for Canadian investors:

1. Private real estate and Canadian REITs

Institutional investors have long leaned into real estate for its blend of income and price appreciation. Canadians have several ways to access the asset class without buying a property outright.

Real estate investment trusts (REITs) — publicly traded funds that own income-generating properties — are accessible through any brokerage account and can be held in an RRSP or TFSA, making them tax-efficient. Canadian REITs trade on the Toronto Stock Exchange (TSX) and span residential, commercial, industrial and retail categories.

For those seeking a more hands-on fractional approach, platforms such as Willow and BuyProperly allow Canadians to invest in income-generating properties with minimums starting at $100 and $2,500 respectively (10). These platforms are relatively new and carry liquidity risk, so investors should review platform terms and consult a qualified financial professional before committing funds.

Note that fractional real estate platforms structured as limited partnerships or corporations are not currently classified as qualified investments under the Income Tax Act, meaning shares typically cannot be held inside a registered account such as an RRSP or TFSA.

2. Finding the right uncorrelated asset

Goldman Sachs chief executive David Solomon warned in November 2025 that a 10% to 20% drawdown in equity markets was possible within 12 to 24 months. Meanwhile, the Shiller cyclically adjusted price-to-earnings (CAPE) ratio for the S&P 500 has soared past 40x — a level last seen in 1999 — suggesting below-average returns may lie ahead for investors heavily weighted to that index.

This is a reminder that diversification across assets with low correlation to stock markets matters. Alternative assets such as infrastructure funds, private credit or real assets can behave differently from equities during downturns. Many Canadian financial institutions now offer alternative mutual funds or alternative ETFs that provide retail investors access to these strategies with regulatory oversight.

3. Gold

Gold has historically served as a store of value and a hedge against currency depreciation during periods of inflation or financial instability. Research from the World Gold Council shows that adding a small gold allocation to a diversified portfolio can help improve risk-adjusted returns (11).