The world’s largest pension funds will favour a total portfolio approach (TPA) rather than focusing on individual asset classes, research from the Thinking Ahead Institute reveals.
Covering the 22 largest pension markets in the world with assets under management of USD62.313 trillion, the 2026 Global Pension Assets Study finds that today’s portfolios require holistic decision-making rather than focusing on asset-class optimisation.
Jessica Gao, Director at the Thinking Ahead Institute,says: “TPA changes the core question from how an asset performs in isolation to how each exposure contributes to total-fund objectives, making it as much a test of organisational maturity as an investment framework.”
She says a switch to TPA is driven by today’s uncertain investment environment which is more complex and interdependent than the one on which traditional governance models were based.
“Rapid technological change as well as more prominent political and systemic risks demand frameworks that can operate with less certainty and weaker model stability. TPA addresses this by enabling faster, more coordinated decisions supported by better data, technology and an organisation-wide perspective,” Gao says.
Gao argues that TPA supports more coherent portfolio construction by clarifying the role of each exposure, the next unit of risk the fund is willing to take, and the trade-offs between private-market opportunity, liquidity and long-term resilience.
“[TPA’s] focus on integrated decision-making and improved data helps investors manage risk through time, not just short-term volatility, and promotes adaptability through scenario analysis and a broader view of risk than traditional models allow,” she says.
The latest research findings follow a March 2025 report from the Thinking Ahead Institute which found that 26 large funds employing TPA saw their investments outperform those using the strategic asset allocation (SAA) model by 1.3 per cent per year over a 10-year period.
Last November, USD611 billion CalPERS was the first US pension fund to announce it would adopt TPA starting in July 2026.
David Miller, Chair of the CalPERS Investment Committee, says the decision to move to TPA was prompted by its potential to deliver better returns for members.
“We are the first pension fund in the United States to do this, and I believe it will give CalPERS staff the edge they need to make sound investment decisions. As always, our goal is to improve our funded status and reduce employer and taxpayer contributions.”
Despite the anticipated move to TPA, some commentators raise questions about how easily pension funds can switch from traditional SAA models.
A February 2026 report from AllianceBernstein notes that TPA brings with it “an organisational challenge”, pointing out that SAA investment teams tend to be siloed by asset class with those responsible for alternative investments separated from those investing in traditional assets.
The report states: “It is far from clear that this is the best way to arrange investment functions under a TPA. Challenging the organisational structure in turn raises the question of what skill sets are needed and the extent to which these may differ from the staffing needs and experience under more traditional approaches. This could be controversial, to say the least.”
