Capital Decanted - S3 Episode 3: Total Portfolio Approach, Part 2

Episode Title: Total Portfolio Approach, Part 2 – Implications for the Broader Investment Ecosystem
Hosts: John Bowman and Aaron Filbeck
Release Date: December 19, 2025

Episode Overview

In this landmark episode of Capital Decanted, John Bowman and Aaron Filbeck explore the “Total Portfolio Approach” (TPA), focusing on its transformative impact across the entire investment ecosystem—especially in light of CalPERS’ recent adoption of TPA. This episode moves beyond the asset owner (LP) side to examine the profound, increasingly urgent implications for general partners (GPs), consultants, and the industry at large. Through candid conversations with industry leaders and deep dives into research findings, John and Aaron challenge prevailing notions and highlight the human, cultural, and organizational nuances critical to TPA’s success.

Key Themes and Discussion Points

1. TPA’s Tipping Point: From Fringe to Mainstream

• Fever Pitch Among LPs, Slow Traction Among GPs:
  • John observes that, despite growing interest and adoption of TPA among LPs of all types and sizes globally, few GPs are actively engaging with the concept.
  • [00:00] “If this is truly the shape changing form and motivation that I think we all agree it will be, then there should be massive implications for the whole ecosystem. And yet, as I said, GPs just don't seem to be on top of this.” – John Bowman
• Malcolm Gladwell’s ‘Tipping Point’:
  • TPA, around for nearly a quarter-century, hits a moment of critical mass, particularly following CalPERS’ adoption, changing the pace and scope of industry experimentation.
  • [04:58]
  • “Has it arrived at its own tipping point? …the fever pitch in the media...and in the boardrooms of big asset owners…has escalated very quickly.” – John Bowman

2. The S Curve and Adoption History

• Early Pioneers & S Curve Adoption:

  • NZ Super, Australia’s Future Fund, Canada’s CPP, and GIC set the TPA foundation. For nearly 20 years, these leaders were outliers, with others considering TPA out of reach or relevant only to mega funds.
  • [14:16]
  • “For a while, these naysayers...were correct. For 20 years after KiwiSuper and the Future Fund birthed this new model, these four were largely still the only games in town around the COVID period. …This was a fundamental rethinking of how institutional capital should be allocated, governed, measured.” – John Bowman

• Recent Acceleration and CalPERS’ Big Bang:

  • The slow burn of TPA suddenly accelerated as more asset owners experimented and CalPERS became the first major US public pension to fully adopt TPA (collapsing 11 asset classes into a single reference portfolio).
  • [26:05]
  • “I think GIC is the one that fits the more massive transition challenge that CalPERS does. ...This is huge, huge news...an iconic moment.” – John Bowman

3. Why Now? Environmental and Performance Catalysts

• Global Investment Regime Change:

  • The “old playbook” is being discarded—structurally higher rates, acute volatility, geopolitical risk, and less predictable markets necessitate a new, flexible approach—fueling TPA’s appeal.
  • [27:18–32:57]

• Early Performance Signals:

  • Studies suggest TPA-backed funds have outperformed peers by ~1.3%-1.4% annually over the last decade, giving the approach social proof alongside theoretical soundness.
  • [33:55]
  • “We’re starting to see some social proof of this being demonstrated quantitatively in practice…” – John Bowman

4. Soft Stuff First: Governance and Culture Over Technicals

• Key Insights from ‘TPA 2.0’ Research:
  • Moving to TPA is ultimately a human, cultural, and governance-focused journey—not simply an update to portfolio math.
  • “My biggest takeaway…the soft stuff...is one most challenging, but also what unlocks a lot of these asset owners to move towards TPA.” – Aaron Filbeck [09:12]
  • Culture and incentives—breaking silos, fostering collaboration, aligning rewards to portfolio outcomes—are more critical than portfolio mechanics.
  • [44:21]
  • “...It’s the soft stuff and that’s governance and culture...the most important...Figuring out who’s accountable, how do you enable collaboration, how do you create incentives so people are driven towards achieving an overall portfolio return rather than just focusing on their individual silo...” – Aaron Filbeck

5. How TPA Changes Portfolio Construction and Processes

• From Policy Portfolios to Reference Portfolios:

  • TPA shifts decision-making from rigid asset class buckets to a flexible, mandate-driven model focused on objectives, risk appetite, and total fund outcomes rather than relative (asset class-level) benchmarks.
  • [53:46–59:35]
  • “TPA moves away from that in its simplest sense. ...The governing body focuses on long-term return targets, risk appetite, and that’s about it.” – Aaron Filbeck

• Examples and Implications:

  • Higher allocations to illiquid and non-benchmark assets; overlays, hedges, and completion portfolios; investments cut across geographies, sectors, factors, not just asset classes.
  • “...We were more comfortable not necessarily having all asset classes represented in our portfolio. ...For a few years we didn’t have any real estate to speak of, which I think you’d agree is quite distinctive...We want to be including things that are attractive and being willing to not include things that are not attractive.” – Charles Hyde [66:40]

6. Misconceptions, Challenges & The Real Difference

• Is TPA just a rebranded SAA?
  • TPA is fundamentally a "fund model" (organizing the entire system, aligning purpose, governance, and investment) vs. SAA’s "investment model" (just asset allocation).
  • “It’s not simply new wine in old skins. ...I think the best way...TPA is a fund model and SAA is an investment model.” – John Bowman [70:19]
  • Core difference: TPA provides the "glue" that explicitly links the fund’s purpose and liability structure to investment risk and return.
  • “At the very essence of the adoption of TPA is fundamentally about behavior and cultural transformation, navigating change, overcoming resistance, building coalitions, aligning purpose with communication.” – John Bowman [48:42]

7. Implications for General Partners (GPs): The Great Rewiring

• GPs Can’t Rely on the “Box Filling” Model Anymore:

  • Movement from 'beauty contests' in pre-defined asset class buckets to 'portfolio impact' and 'solution provider.' GPs must understand (and position themselves in relation to) the whole portfolio, not just their product vertical.
  • [77:05]
  • “You are now in a TPA model competing against a litany of every good idea across asset classes and risk premia. ...Portfolio fit is the most critical factor now.” – John Bowman

• GPs Must Become Chief Problem Solvers:

  • Move beyond product pitching; actively collaborate and co-create solutions with LPs that address total portfolio needs, not just fill asset class allocations.
  • [80:25]
  • “There's such a sharp contrast between being an arm's length transactional parts provider for an asset owner versus a strategic partner that requires a consultative engagement and a much deeper awareness of what's going on...” – Gene Pod Commoner

• Willingness to Adopt New Language, Technology, and Structures:

  • GPs must grasp and articulate risk factor exposures, customize solutions, and build deeper relationships with fewer but more strategic clients.
  • Co-creating mandates, flexible separate accounts, and forming longer, stickier relationships will become the industry norm.
  • [85:12–88:44]
  • “You’ll need to employ a different language and tools…We need to completely rewire the words and the phrases that we use.” – John Bowman

Memorable Quotes & Timestamps

• On TPA’s Core Shift:
  • “Ultimately, I’ve learned that this is at its roots a human endeavor, and that’s so different and perhaps unnatural to the way we’re often wired in this industry.” – John Bowman [10:13]
• The Case for TPA Over SAA:
  • “There is no preset asset allocation…Management in a total portfolio approach really has full discretion to design a portfolio that meets the risk expectations of governance, but is otherwise free...” – Jeff Rubin [50:43]
• On Portfolio Collaboration:
  • “I want to stress, this doesn’t remove the need for those specialists – but they just need to communicate with one another…” – Aaron Filbeck [54:21]
• GP Mindset Reset:
  • “This is not a product pitch, this is not a transactional relationship…there’s been a long running convergence from trying to be a parts provider to trying to be a partner.” – Gene Pod Commoner [80:25]
• On the TPA Journey:
  • “It was a journey that they went on. ...There’s a lot of experimentation that’s involved in moving towards TPA.” – Aaron Filbeck [44:21]

Notable Segments & Timestamps

• The GPs’ Disconnect and the Opportunity Ahead: [00:00–02:58]
• Tipping Points and S-Curve Adoption: [03:47–10:13]
• TPA History: From Early Innovators to Mass Adoption: [14:16–26:22]
• CalPERS’ “Big Bang” Moment: [25:10–27:08]
• Why the Shift? Markets, Regimes, and Performance: [27:18–36:36]
• Reference Portfolio Freedom: Charles Hyde Interview: [36:36–40:10, 66:40]
• Second TPA Paper: The Importance of Soft Factors: [43:18–50:14]
• Portfolio Changes Under TPA, and Cultural Implications: [53:46–66:10]
• Implications for GPs—What Does the New Playbook Look Like?: [77:05–93:06]

Conclusion

This episode of Capital Decanted serves as an in-depth guide and a provocative challenge to everyone in asset management confronting TPA’s rise. John and Aaron articulate how TPA is not merely a technical upgrade but a rewiring of incentives, culture, and industry relationships. The shift is both subtle and revolutionary—impacting investment professionals, boards, consultants, and especially GPs. The discussion concludes with a strong call to action: all industry participants must adapt to or risk obsolescence in the new era of total portfolio management, where solution-driven collaboration and holistic thinking win the day.

“This clarion call...is not set out of judgment, it’s set out of encouragement. ...If our goal is optimizing and improving investment outcomes, every piece of this ecosystem...has to be moving at a similar pace.” – John Bowman [91:59]