Where Did The Total Portfolio Approach Come From.....And Where Is It Going?

“Harry Markowitz’s contribution consisted of developing a rigorously formulated operational theory for portfolio selection under uncertainty.”

Nobel Prize Committee, 1990

“The investment methodology Total Portfolio Approach (TPA) is making big waves at the moment. Funds in large numbers are thinking about ways to make the transition to TPA….but the paradox is that not much money is run this way yet.”

Roger Urwin, WTW, 2025

“We believe TPA deserves the mobilising oxygen that the Chartered Alternative Investment Analyst Association (CAIA)’s global convening power can provide to a transformative topic.”

John Bowman, CAIA, 2025

What is TPA?

As a long-time commentator on strategic issues in the pensions field, comments like the two recent ones above motivated me to have a good look at the Total Portfolio Approach (TPA). Here is a summary of my reading notes on definitions and descriptions of TPA:

• TPA is an integrated, goal-oriented investment framework
• TPA is a unified means of assessing risk and return of the whole portfolio
• TPA is a process and culture configured to extract a team’s best work in portfolio construction
• TPA encapsulates a different approach to investment strategy
• TPA has a long-term drawdown risk focus
• TPA requires collaborative team-work
• TPA requires boards that can think strategically but are also nimble
• TPA requires tech-savvy and a culture of innovation
• TPA addresses alignment issues between alpha and beta
• TPA addresses opportunity cost issues associated with static frameworks such as Strategic Asset Allocation (SAA)