‘TPA allows for the investment teams to be much more kind of dynamic in their thinking and how they allocate capital,’ says CAIA’s Aaron Filbeck
After decades of assumptions about interest rates, inflation, and market behaviour, the playbook of strategic asset allocation is being revised.
Notably, as one investment expert highlights, the total portfolio approach (TPA) is a framework that a growing number of institutional investors are adopting to navigate this changed landscape.
Aaron Filbeck, managing director of content and community strategy at CAIA Association, argues that total portfolio approach is gaining traction for two main reasons: a tougher, more complex market regime and the need for better, less constrained decision-making.
“Whether you're looking at shifts in some of the assumptions that we've had for such a long time, changes in interest rates, inflation, capital formation, and where public and private markets are converging, the environment has definitely become more challenging, but also more dynamic and fluid for a lot of investors,” he said.
That evolving context feeds directly into how institutions make decisions. Filbeck’s view is that the TPA gives investment teams more freedom to respond to opportunities and risks, rather than being boxed in by rigid policy benchmarks and siloed allocations.
“TPA allows for the investment teams to be much more dynamic in their thinking and how they allocate capital. It allows them to be less constrained in a lot of ways around making investment decisions and so on,” said Filbeck.
But making TPA work at scale, with billions of dollars and competing portfolio interests, requires more than a portfolio restructure. Filbeck believes that the total portfolio approach only works when investors tackle the hard organizational issues behind it, not just the portfolio structure. Together, the market backdrop and this need for more flexible, outcome‑driven decision-making explain why more asset owners are now pursuing TPA and why some are already serving as “proof case” adopters, noted Filbeck.
In his view, the real enablers are governance and culture, emphasizing that boards need to set clear objectives and risk parameters, then delegate authority so investment teams can build and adjust portfolios directly, instead of dictating detailed allocation weights and rigid benchmarks as in a classic strategic asset allocation (SAA) regime. When that governance structure is in place, it reshapes culture.
In the traditional model, asset class heads are incentivized to “fill their buckets” to the prescribed weights, even when the opportunity set doesn’t justify it, Filbeck noted. TPA tries to break that behaviour by redefining incentives around the performance of the total fund. Asset class leaders are expected to collaborate, compare opportunities across sleeves, and prioritize what benefits the overall portfolio rather than defending their own allocation.
He acknowledged that CAIA’s work on TPA has followed two tracks:defining the framework and its core dimensions, then examining how asset owners actually move from a traditional SAA setup into a total portfolio model.
But according to Filbeck, that shift is rarely immediate because for most institutions, adopting TPA is a gradual transition rather than a starting point.
For Filbeck, the combination of strong governance and a culture aligned to whole‑portfolio outcomes is what allows institutional investors to hand capital back, reallocate across silos, and stay focused on fund-level results.
Filbeck also acknowledged how the TPA can change both the speed and the horizon of investment decision‑making. Because investors are no longer managing to rigid benchmarks but to long‑term, outcome‑based objectives like CPI‑plus targets, they can step back from short‑term noise and think over a longer time frame.
In practice, that flexibility cuts both ways. In some conditions the best decision is to sit tight, while in others, particularly during market dislocations, it lets them move quickly when attractive opportunities appear. The framework also opens the door to investing in non‑traditional or off‑benchmark strategies and encourages a bottom‑up assessment of specific exposures and deals, rather than forcing everything into pre‑set SAA buckets.
The TPA approach also serves two purposes at once, according to Filbeck. It’s designed to not only sharpen returns but also reshape how investors manage risk.
On the return side, he describes TPA as “a return optimizer in the sense that you're trying to allocate your capital towards the best opportunity set possible,” he said. A key pillar is what he calls “competition for capital,” where every deal, strategy, or mandate has to justify its place against all other options for that marginal dollar in the portfolio.
For investors and asset managers, that means constantly revisiting the existing portfolio, the fund’s objective and the live opportunity set, and then asking how to allocate within agreed guardrails to hit the target outcome.
Consequently, he underscored that TPA overlays a different risk lens. Instead of managing to asset class labels or tracking a strategic asset allocation benchmark, investors drill into what they actually hold economically. They run look-throughs to understand exposures to growth, inflation and interest rates, rather than worrying whether they have enough private equity in the portfolio, he said.
This factor-based view, which he describes as one of TPA’s core dimensions, creates what he sees as a feedback loop.
“You're constantly trying to optimize performance, but then you have a very different view of the risk that you're trying to mitigate, manage around in the portfolio,” he added.
While the TPA is early in its adoption curve, Filbeck emphasized it is gaining momentum. He expects interest to build as markets push funds toward more flexible models and as case studies show it “working relatively well,” he said, noting domestically, the CPP is one of the biggest adopters and “leading the pack” among Canadian pension plans.
“What's unique about the Canadian pension system is you do have a governance setup that lends itself really well to TPA. And there are, I think, several plans that are either moving in this direction explicitly, or they're borrowing elements of TPA,” explained Filbeck. “The Maple model is one that I think lends itself really well to TPA."
