More organizations are touting the total portfolio approach — but not everyone is on board.

Following the California Public Employees’ Retirement System’s move to implement TPA for its $556.3 billion portfolio, the CAIA Association has released a report offering investors a road map for implementing the approach currently used by sovereign wealth funds like Singapore’s GIC and Australia’s Future Fund.

The association’s report, which was developed with WTW, examines how TPA is being implemented and highlights the challenges and successes that investors have had moving from a strategic asset allocation model.

A follow-up to CAIA’s 2024 paper promoting TPA, the report draws on interviews with over a dozen chief investment officers to show how organizations are managing operational, governance, and cultural changes. Aaron Filbeck, CAIA’s managing director of content and community strategy, said that while SAA keeps assets (and investment staff) in siloed buckets, TPA allows for more collaboration.

“Your different asset class teams are talking to each other in a different way,” Filbeck told Institutional Investor over the phone. “You still have a private equity specialist, but they no longer just fill their part of the portfolio and call it a day.”

For example, the private equity head could give up a sleeve of that portfolio to real estate because the real estate team identified an ideal allocation. “So, you have this collaborative spirit,” he explained. “It goes from an, ‘I have to fill my buckets’ mindset to a competition for capital mindset.”

With SAA, the organization’s governing body sets the objectives then hands the investment team a prescriptive asset allocation. The process then gets periodically reviewed. But Filbeck argued that with a TPA framework, there is a clear delineation between who owns the objective (the board) and who’s actually managing the pool of capital (the investment team). “It’s more clearly delineated who's who with TPA,” he said.

Skepticism Remains

While organizations like CAIA argue that swapping SAA with TPA is the way to go, not everyone is on board. Keith Ambachtsheer, founder of KPA Advisory and director emeritus of the Toronto-based International Centre for Pension Management, is quoted in PitchBook as calling TPA “all smoke” with nothing new to offer (he confirmed his position in an email with II).

One small public allocator told II that while TPA makes sense for giant sovereign wealth funds and pensions like CalPERS, it's not ideal for smaller institutions that lack large and sophisticated investment staffs and resources — even going so far as to call it “snake oil.”

“TPA is being pushed on us as the brand-new thing. It’s good for mega-plans but when you get below the $5 billion plan size it’s hard to argue for it,” the allocator said. “If we move to a risk factor, there’s no way a board member can be sophisticated enough. How do they know you’re in compliance? It’s kind of undercutting the governance process.”

Meanwhile, Paul O'Brien, trustee and investment committee member at the $12 billion Wyoming Retirement System, cautioned that TPA is very difficult to do right. Even with the aid of AI tools, it requires a lot of work, resources, and the right systems to get right.

“In a perfect world, TPA would be the way to go. But we are not in a perfect world,” O’Brien added.

“More a Mindset Than a Model”

Filbeck pushed back against the notion that the framework is only for the largest institutions. “TPA is more of a mindset around decision-making rather than a prescriptive model,” he said, adding that the ideas of clear governance and collaborative culture can be implemented at any scale. “You can do TPA with 4 people or 400.”

For Filbeck, the most critical hurdles for asset owners adopting a TPA framework aren’t resources or a large savvy investment staff. The real obstacle is that the approach requires a fundamental shift in thinking from the industry.

“It’s really the soft stuff — governance and culture — that’s most important and most difficult for asset owners to achieve to get towards a TPA state,” he said.