Total portfolio approaches have been evolved by some leading organisations around the world as a more ‘joined up’ investment philosophy that results in a more streamlined approach to portfolio construction.
This paper includes discussions on the findings of a global study into current and future asset allocation practices of leading asset owners, and describes the research investigations being carried out in the Thinking Ahead Institute to take this concept further.
In this paper, we urge for a switch of thinking to better connect the total portfolio with the fund goals. Such thinking leads to an alternative approach to portfolio construction, in which the central theme is to construct the portfolio of assets such that there is a continuous and dynamic focus on achieving the explicit objectives of the AO. Such thinking has been embedded in alternative methodologies which are referred to collectively as total portfolio approaches.
A total portfolio approach (TPA) to portfolio construction has been described as a “more joined up” process. Importantly it starts with clearly specified investment goals, there is competition for capital among all investment opportunities, rather than filling asset class buckets, and it is dynamic.
The key to simplifying a complex organisation and understanding its effectiveness is to break it down into its three functional parts:
- Governance model – organisational structure, resources, decision making, technology
- People model – talent, culture, employee value proposition, incentives
- Investment model – beliefs, risk framework, portfolio construction process, systems and tools.
Amundi Investment Insights paper
Multi Asset: a solid total portfolio approach for a complex world
In their complementary paper Amundi share their vision of TPA from an asset manager’s standpoint, describing how it resonates with their approach to asset allocation.
Total portfolio approach symposium |10-11 March 2020
It’s a drag: why TPA is superior to SAA – top1000funds
‘Quiet revolution’: it’s better than strategic asset allocation – Investor Strategy