The concept of “total portfolio approach” is reshaping how large institutional investors think about constructing and managing their portfolios, marking one of the most significant philosophical and operational shifts in portfolio construction—what Franklin Templeton calls a “natural evolution of modern portfolio theory.”
The approach, which views the portfolio through a holistic lens—aims to assess a fund’s performance based on its objective, rather than relying on an asset class policy and individual benchmarks for each asset class.
Using this approach, WTW’s Thinking Ahead Institute noted, diversification is achieved through risk factors, rather than asset class silos. The portfolio is implemented through one investment team’s collaboration, rather than several asset class teams competing for capital and then investing against their set benchmarks.
TPA has already been adopted by several large global investors, including Singapore’s GIC Private Ltd., Australia’s Future Fund, the Canada Pension Plan Investment Board and the New Zealand Superannuation Fund.
In December 2025, the $606.64 billion California Public Employees’ Retirement System became the first major U.S. allocator to adopt the approach, and it will certainly not be the last.
The adoption of TPA is a multi-year effort, not something that happens overnight. TPA is also a spectrum: It can look different in each use case. But as more pension funds explore its adoption, industry observers note that both operational and technological perspectives must be considered.
Defining the Technology Stack
Adopting TPA requires a level of operations and technology transformation that can be difficult and costly, as Melanie Pickett, chief transformation officer at Northern Trust, told CIO in November 2025.
Large plans like CalPERS that are adopting TPA must integrate separate systems for accounting, private markets and total portfolio analytics, Pickett noted.
“A big risk is ensuring the quality and accuracy of data across complex portfolios, especially when daily trading and hedging decisions depend on this information,” she said.
Several industry observers emphasize the importance of having high-quality data to support the implementation of TPA.
“You can throw technology at a problem, but if you don’t have underlying information and data, that makes it really challenging,” says Aaron Filbeck, managing director of the Chartered Alternative Investment Analyst Association.
Jeremy Katzeff, head of buy-side solutions at GoldenSource Corp., notes that the lack of standardization of datasets in private markets, as compared with public markets, is still an issue that challenges many institutional investors. While data providers like Preqin, Capital IQ and Factset have made this work easier, many still rely on unstructured data from their general partners.
Visibility into data across all investment teams is essential to achieving the whole-portfolio perspective that TPA requires.
“Operationally, it starts with being able to unify those different datasets and bring them together in one location: some sort of centralized data warehouse, some sort of technology that allows everyone to speak the same language,” Katzeff says. “So that you can aggregate that into a true whole-of-fund view.”
Once these issues are resolved, investment teams can then determine what their investment operating model looks like under a total portfolio approach, Katzeff says.
Gene Podkaminer, a senior asset allocation strategist at Capital Group, emphasizes that while TPA represents a meaningful shift in mindset, many of its underlying tools are not new to the industry, such as using risk factors as the common language across asset classes and across strategies.
“That’s not a new concept in the industry, but it’s very tightly bound with the way TPA is approached,” Podkaminer says.
Many large asset owners have built their own proprietary tools or are using tools already built that can support the shift to TPA.
“There are also several providers out there that have created a tool kit—not a TPA-specific tool kit, but a risk-factor tool kit—that can help bridge the gap between an asset class view and a risk factor view,” Podkaminer says.
Governance Is the Glue
Industry observers note that TPA cannot be successful unless a fund has strong governance and the will to make the changes necessitated by such an approach. Implementing a governance model in line with TPA could even be the hardest part of implementation.
“It’s the soft stuff that’s really difficult for a lot of these organizations,” Filbeck says. “It’s getting your governance right, it’s getting your cultural incentives realigned, it’s collaboration. … A lot of this is siloed—our incentives are siloed—and so breaking down those barriers are the challenging elements of making this work, but it’s the thing that unlocks that value-add.”
Denise Kehler, CIO for North America at WTW, also notes that strong governance is key to the transition to a total portfolio approach, which, in turn, requires a fund to have the right technology and data supporting new decisions.
“If you’re moving from [strategic asset allocation] to [TPA], you’re making sure that your best ideas from the whole team benefit the whole fund,” Kehler says. “You need flexibility to be dynamic. As you are moving through that transition, it’s first led by the governance model. … You have to have a very clear mission: ‘What are we trying to accomplish as a group?’ Then you have to transform people. People have to think differently, they have to work differently, and then you get to the investment model.”
In the end, both governance and data are essential to successful implementation.
“In order for all of that to work together, you have to have the right information,” Kehler says. “You have to be measuring the right thing; you have to [have the] right data to be supporting the decision.”
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