CFA Institute Publishes Research on Implementing Total Portfolio Approach

The CFA Institute Research and Policy Center today published The Total Portfolio Approach: A Practical Guide for Navigating the Transition to TPA, which examines how institutional investors are applying the Total Portfolio Approach (TPA) to investing and the practical considerations involved in its adoption. 

Drawing on interviews with 14 senior executives from industry leaders representing more than US$2.8 trillion in assets under management, the new research examines how organizations are applying the Total Portfolio Approach in practice. TPA is an integrated, goal-driven, and dynamic investment framework that evaluates every investment based on its contribution to the total fund’s objectives rather than managing capital through asset class silos.   

The research finds that organizations are adopting TPA in different ways and to different degrees, rather than through a single implementation model, reflecting differences in objectives, governance structures, and organizational capability. The research concludes that governance, culture, and leadership are among the most significant factors influencing successful implementation. 

Mona Naqvi, Managing Director, Research and Policy Center, CFA Institute, says:

"We expected our conversations with investors using the Total Portfolio Approach to focus primarily on methodology. Instead, the recurring theme was governance. The difficult work in moving toward TPA is rarely about the investment framework alone. It is about whether boards and investment teams have a shared purpose, clear decision rights, and the ability to act in the interests of the whole portfolio. The investment framework matters, but governance determines whether it works in practice."

The research is designed to help boards and investment teams assess whether, and to what extent, the Total Portfolio Approach is appropriate for their organization. Key findings include: 

• TPA is not just portfolio construction. It represents a way of organizing people, data, processes, and decision rights so that investment choices at every level contribute to total-fund objectives.
• TPA is fundamentally goal driven. The starting point begins with what each investment contributes to total portfolio objectives, including return enhancement, risk, liquidity, portfolio resilience, and alignment with long-term goals as opposed to benchmarks.
• TPA is a spectrum, not a one-time switch. Organizations can move from light enhancements to strategic asset allocation frameworks to a fully integrated, whole-fund TPA, depending on their objectives, resources and capabilities. For many asset owners, prevailing Strategic Asset Allocation (SAA) approaches will remain appropriate.
• The main barriers are organizational rather than technical. Successful adoption requires a one-organization mindset, stronger collaboration across teams, and active management of cultural change.

The report also outlines practical first steps and guardrails for organizations considering TPA:

• Assess fit and readiness: test whether the current Strategic Asset Allocation framework serves the fund's objectives, then evaluate governance, culture, skills, and data readiness.
• Take deliberate first steps: for those asset owners that seek to transition to TPA, they should set investment beliefs, review governance, build a reference portfolio, and develop total-fund dashboards.
• Maintain guardrails: strengthen board oversight and utilize dashboards, scenario analysis, and strategic foresight to track progress and build resilience.

Roger Urwin FSIP, co-author of the report, and co-founder of the Thinking Ahead Institute, said:

"Every investment organization has to answer the same question: does its current investment framework still reflect the objectives it is trying to achieve? This new research is designed to help boards and investment teams think more clearly about how governance, decision-making, and portfolio construction fit together. Strategic Asset Allocation will remain the right answer for many organizations. For others, the Total Portfolio Approach offers a way to connect every investment decision to the objectives of the whole fund and to navigate a more complex investment environment."

The Total Portfolio Approach: A Practical Guide for Navigating the Transition to TPA is available to download.

Notes to Editors

Mona Naqvi and Roger Urwin discuss the Total Portfolio Approach on two recent episodes of the CFA Institute Research and Policy Center Enterprising Investor podcast at: From Strategic Asset Allocation to a Total Portfolio Mindset and What a Total Portfolio Approach Looks Like in Practice.

A new CFA Institute Research Foundation literature review on Total Portfolio Approach is available to download.