Understanding the Total Portfolio Approach

Defining the Total Portfolio Approach (TPA)

Under a Total Portfolio framework, all assets – public and private – are viewed together for risk, performance, and strategic decisions. Traditional portfolio construction often relies on Strategic Asset Allocation (SAA): setting target weights for asset classes (e.g. stocks, bonds, alternatives) and managing each silo with its own team and benchmark. By contrast, a TPA treats the entire investment pool as one portfolio, emphasizing total fund outcomes over individual asset-class performance. As one industry expert defines it, TPA is “one unified means of assessing risk and return of the whole portfolio.” caia.org In practice, this means coordinating investment decisions and enterprise risk oversight across all holdings, effectively dissolving the traditional asset-class boundaries that siloed approaches maintain. A unified investment team can look across public and private assets together, rather than managing each segment in isolation.

This holistic philosophy emerged in response to the shortcomings of the SAA model. While SAA is foundational, it can breed siloed behavior among asset-class teams and lead to duplicative or uncoordinated risks. For example, a pension might unknowingly be overweight the same risk factor in different silos. SAA also tends to be inflexible in adapting to new opportunities or threats, since each sector is managed only relative to its own narrow benchmark. TPA aims to overcome these issues by empowering a unified team to allocate capital wherever the best risk-adjusted returns appear, unconstrained by rigid asset buckets top1000funds.com. In other words, a dollar in private credit must compete on equal footing with a dollar in public equity (or any other asset) for its place in the portfolio, based on the organization’s overall objectives and risk/return criteria. This shift in mindset enables more dynamic and opportunistic portfolio adjustments than the static SAA process.

Relevance for Public and Private Asset Managers

As investment mandates evolve, both asset owners (like pensions, endowments, sovereign funds) and asset managers are being asked to deliver unified portfolio outcomes, not just siloed returns. The Total Portfolio concept appeals to both groups, though the value proposition may differ slightly for each:

• For Asset Owners: TPA provides holistic oversight and stronger governance of the entire enterprise. CIOs and boards gain clearer enterprise risk clarity and can align the whole portfolio with their long-term goals and liabilities. Instead of evaluating each fund or mandate in isolation, large asset owners increasingly scrutinize exposures and performance at the aggregate level. They want integrated dashboards showing all holdings, exposures, and risks in one view, which helps them monitor concentrations or hidden correlations and take action to add or hedge risks appropriately. In short, TPA offers asset owners a more transparent, goal-driven view of their program. It also enhances decision-making under stress. A firm’s leadership can assess the true total-fund risk profile and liquidity needs only if both public and private assets are incorporated together. For instance, Korea’s $200+ billion sovereign fund KIC recently launched a review to adopt TPA so it can introduce a whole-fund “reference portfolio,” use factor-based risk lenses across asset classes, and develop integrated liquidity forecasting models for the entire portfolio. top1000funds.com
• For Asset Managers managing money on behalf of clients: adopting a total portfolio mindset can be a competitive differentiator in today’s market. Institutional clients now demand greater transparency and unified reporting across all investment holdings. An asset manager who can deliver an integrated view of a client’s public and private holdings adds value beyond what a siloed, fund-by-fund report provides. This capability meets growing investor expectations for seeing “the full picture” of their money at work. It also enables product innovation and customized solutions. As the boundaries between public and private markets blur, many traditional public-market managers have expanded into alternatives (private equity, private credit, real estate, infrastructure, etc.) while private-market specialists are offering products with more liquidity or hybrid evergreen structures. Investors are increasingly building bespoke portfolios combining liquid and illiquid assets. In this context, portfolio management can no longer be neatly split – systems and teams must integrate both. As one Canadian asset manager noted, the TPA approach “is the way to go, to be able to have that unified view of all those risks and different factors on a client-by-client basis.” top1000funds.com.  Providing such a holistic service not only satisfies client oversight needs but can also lead to better investment outcomes by allowing managers to coordinate strategies across asset classes rather than running each in a vacuum.

Notably, the push toward TPA is coming from the top. C-suite executives and senior investment leaders are often the biggest champions of this approach, because they want a consolidated view of the entire enterprise. A CEO or CIO with a total-portfolio dashboard can slice the portfolio by any dimension – geography, sector, currency, risk factor, etc. – to see exactly where the firm’s exposures and performance drivers lie across both liquid and illiquid holdings. This “one lens” view makes it far easier to spot unintended bets or gaps that siloed reports might miss. Enterprise-level risk management is a major motivator: without incorporating private assets alongside publics, an allocator cannot fully assess its true risk profile or liquidity position under stress scenarios. A TPA enables leadership to evaluate how the whole fund might behave in adverse conditions and to plan accordingly (for example, ensuring sufficient liquidity to meet obligations during a market drawdown and private capital calls). Unsurprisingly, industry forums have found that many asset owners now agree that breaking down silos and coordinating risk decisions via TPA is increasingly attractive in today’s complex environment msci.com. In fact, even some of the world’s largest institutions (such as CalPERS and other leading funds) are actively weighing a shift to TPA to achieve better alignment of portfolio goals and more nimble, opportunistic investing top1000funds.com.

Key Components and Benefits of TPA

A Total Portfolio framework encompasses several key components that address the needs of modern investment organizations. Below are the major elements and their benefits:

• Holistic Risk View: At the core of TPA is an integrated, enterprise-wide perspective on risk. Rather than separate risk reports and models for each asset class silo, the total portfolio approach evaluates risk top-down across all assets. This means measures like value-at-risk, scenario analyses, and stress tests are calculated on the entire portfolio, accounting for how different asset segments interact. A unified risk view provides a clearer picture of cross-asset correlations and concentrations. Siloed risk assessments might underestimate a simultaneous drop in both public markets and private asset valuations or miss that multiple “silos” are exposed to the same underlying factor. TPA, by contrast, reveals these relationships. For example, an investment team might believe a new allocation is a diversifier, when in reality it amplifies an existing exposure (say, adding a private credit investment that inadvertently doubles up on foreign currency risk already present in public equities) top1000funds.com. Only a total-portfolio risk lens would catch that kind of overlap. By seeing aggregate risks, firms can avoid unintended bets and make more informed strategic decisions about where to dial risk up or down.

• Unified Data & Reporting: Implementing a TPA requires integrated data management across the organization. All portfolio data – from public securities to private holdings – needs to feed into a common system or data warehouse so that reporting can be truly unified. This creates a single source of truth for performance measurement, attribution, and exposure tracking. As a result, stakeholders (from the CIO to clients or auditors) can look at consistent reports covering the whole portfolio, rather than tediously cobbling together disparate spreadsheets from each silo. Unified reporting makes it easy to slice the portfolio by strategy, asset type, region, or any other dimension using the same dataset. It also greatly eases compliance and client communications, since any requested view (e.g. “total emerging markets exposure across all funds”) can be generated on demand. Achieving this data unity often means investing in technology – for instance, a firm might implement a centralized investment book of record and a robust risk analytics engine (we will explore the tech enablers in detail in part 2 of this blog series). The payoff is substantial – without an integrated platform, an organization may struggle to confirm in real time that all investment guidelines are being respected, especially if private and public assets are run on separate systems top1000funds.com. TPA’s unified data approach ensures everyone is working off the same numbers and that nothing falls through the cracks.

• Combined Portfolio Strategy: Adopting TPA elevates portfolio construction to a higher, more flexible level. Instead of adhering rigidly to fixed asset-class buckets, the investment team manages against the total portfolio’s objectives. Asset allocation and investment decisions are made with the end-goal in mind (e.g. a required total return for the fund), rather than to simply fill predefined silo targets. This allows for more dynamism and agility in shifting investments compared to a static SAA policy. In fact, a global study of asset owners found that those who embraced TPA were roughly twice as active in adjusting their allocations and generated about 1% higher risk-adjusted returns per year compared to their peers pgim.com. Similarly, over a 10-year period TPA organizations outperformed traditional SAA-driven organizations by an estimated 1.8% per annum on average top1000funds.com – a significant margin in institutional investing. This flexibility to allocate capital to the highest-conviction ideas (regardless of what asset class they fall under) is a hallmark of TPA, and it can add real value. The total portfolio mindset encourages innovation and dynamism because the focus is on the overall outcome for the fund. Every potential investment must justify itself in competition with all others. As one investment leader described it, TPA requires each unit of allocation to “earn its place” by optimally contributing to the portfolio’s goals caia.org. This competitive capital framework ensures that the very best opportunities – whether in private credit, public equity, real assets, or elsewhere – are funded, while lower-conviction or redundant exposures are minimized. (Of course, guardrails like liquidity limits or risk budgets still apply, but within those, the TPA discipline is to always seek the best total-portfolio mix.) The result is a more nimble strategy that can proactively tilt toward attractive areas or away from looming risks, unconstrained by arbitrary silo weights.

• Liquidity Management: A practical area where TPA adds significant value is in managing liquidity and cash flows at the total portfolio level. As firms (and their clients) increase allocations to illiquid assets like private equity or infrastructure, the challenge of liquidity timing grows. A Total Portfolio framework forces an integrated view of liquidity needs: tracking upcoming private asset capital calls, distributions, and public market cash requirements together. By forecasting cash flows and liquidity for the whole portfolio, the team can ensure the fund meets obligations and optimizes cash usage without selling assets at the wrong time. For example, if a pension fund knows that over the next quarter it has several large private equity capital calls scheduled (outflows) and perhaps some bond coupon inflows, plus a potential need for collateral on its derivatives, all those can be planned in one place. The TPA approach would enable the fund to decide if it should raise some cash by trimming a public equity position in advance, or secure a credit line, or slow down new private commitments – all based on an integrated picture of liquidity. This enterprise-level lens helps avoid liquidity crunches that may not be apparent when each silo manages its managed cash in isolation. Developing robust liquidity forecasting models across asset classes is often one of the priorities for institutions embracing TPA top1000funds.com. By viewing liquid and illiquid holdings together, managers can more confidently stay within their liquidity risk tolerance. (We will discuss tools for liquidity management under TPA in the next part of this series, including how technology can assist in real-time liquidity monitoring.)

• Enterprise Compliance & Constraints: A Total Portfolio approach also aids in meeting various compliance, regulatory, and stakeholder-imposed constraints on a truly comprehensive basis. Large asset owners often have firm-wide limits or policies – for example, maximum exposure to a certain country or sector across all investments, or ESG guidelines that prohibit certain holdings anywhere in the portfolio. If each silo is run separately, it’s easy to inadvertently breach such limits in aggregate even though each silo thinks it’s within its individual allowance. Under TPA, these constraints are monitored at the portfolio-wide level, ensuring the entire organization stays in compliance. The risk and compliance teams can evaluate exposures relative to limits after aggregating all positions. This approach also simplifies reporting to boards and regulators. Rather than presenting a patchwork of silo reports, the firm can demonstrate compliance and risk management in one coherent view. For example, an institutional asset manager might have a rule that no more than 10% of the total portfolio can be in any single country or issuer – a TPA system would continuously check this across every asset class. If managed in silos, one team might not realize that another team’s holdings push the manager’s aggregate exposure over the line. One real-world challenge noted by industry practitioners is the “data problem”: if, say, the private markets book is run on a separate system from the public markets book, simply aggregating exposures and checks in real time becomes difficult top1000funds.com. TPA’s unified data and governance structure solves this by design. Managing compliance at the total portfolio level provides assurance that all mandates and limits (ethical, regulatory, concentration, etc.) are respected in sum, aligning the investment process with the enterprise’s overall fiduciary duties and stakeholders’ expectations.

Why TPA Matters Now

Total Portfolio Management represents a paradigm shift in how investment organizations approach portfolio construction. It moves the mindset from a fragmented collection of asset-class buckets to a singular, consolidated perspective of “one portfolio.” This shift is being driven by client demands for greater transparency, holistic risk oversight, and tailored solutions, as well as by the increasing complexity of markets which renders siloed approaches less effective. Advances in technology, data integration, and risk analytics have made it more feasible to implement TPA today, enabling the necessary unification of systems and teams.

For investment leaders, the message is clear: firms that embrace a total portfolio approach will be better positioned to meet evolving client expectations, adapt to market changes, and unlock what some call “total enterprise alpha.” The evidence is mounting that a TPA can enhance performance and risk management. We do not view this as fad, but a structural upgrade to how portfolios are managed in a world where agility and integration come at a premium. The following parts of this blog series will explore how to implement TPA in practice and overcome the organizational challenges, as well as the technology tools (data architecture, analytics, etc.) that can enable this unified approach.

Finally, it should be noted that adopting TPA is a new mindset, but it doesn’t necessarily mean abandoning all aspects of SAA. Strategic Asset Allocation still provides a useful long-term reference or “guardrail” for many institutions. The Total Portfolio Approach builds on that foundation by adding a layer of tactical flexibility and enterprise-level coordination. Done right, TPA combines the discipline of SAA with the agility to respond to today’s opportunities and risks – ultimately aiming for better outcomes for the whole portfolio and the organization behind it.

Discover How to Make the Shift

Over the coming weeks, we’ll break down the practical steps for implementing TPA, from organizational alignment to technology enablers. Follow this series and reach out to our team if you’d like to explore how to apply these principles in your organization today.

Sources:

1. Geoffrey Rubin (CPPIB) defining the Total Portfolio Approachcaia.org
2. Pedro Guazo (UNJSPF) on adapting to a total portfolio view amid changing volatilitytop1000funds.com
3. Jean David Tremblay-Frenette (AIMCo) on the client-centric need for a unified viewtop1000funds.com
4. Allen Zimmerman (SimCorp) on data silos hindering guidelines compliance and hidden riskstop1000funds.comtop1000funds.com
5. Darcy Song, Top1000funds.com – “KIC eyes pivot to total portfolio approach” (on KIC’s TPA review and industry study results)top1000funds.comtop1000funds.com
6. Rick Bookstaber et al., MSCI – “How Asset Owners Are Redefining the Total Portfolio Approach” (MSCI Institutional Investor Forums)msci.com
7. Stuart Jarvis, PGIM – “Rethinking Diversification: Learnings from a TPA” (on activity and returns of TPA adopters)pgim.com
8. Roger Urwin, Thinking Ahead Institute – findings on TPA vs SAA performance and complexity managementtop1000funds.comtop1000funds.com