It is unlikely that California’s public workers will notice any immediate changes to their pensions come next July. Their payslips will be unchanged, and their contributions unaffected. Behind the scenes, however, CalPERS’ decision to adopt the total portfolio approach (TPA) may prove one of the most consequential investment shifts of the new year. After years of below-average returns, the hope is that a change in investment philosophy will help reset the trajectory of the $579bn (€493bn) fund.
The appeal of TPA is evident. CalPERS’ chief investment officer Stephen Gilmore brings the approach over from his time at New Zealand Super, where the fund generated strong long-term returns after reorganising around the total-fund mindset.
A recent white paper from the Thinking Ahead Institute suggests its theoretical advantages are now largely accepted by funds. Taking all of this into consideration, it becomes tempting to view TPA as a quick fix for disappointing returns. It is not.
For decades, pension funds have been built around strategic asset allocation (SAA). The framework first took shape in the 1950s, with the emergence of modern portfolio construction and long-term diversification of assets. Portfolios were organised by asset class, supported by governance structures designed to prioritise stability and control risk. This worked well in the slower world SAA is a reminder of.
But now, what once provided discipline now creates friction. Decisions are slower, portfolios are fragmented, and opportunities are easily missed. It is this growing mismatch between structure and reality that has driven interest in the total portfolio approach.
TPA treats the fund as a single, integrated portfolio. Every position is weighed on its contribution to total-fund risk, liquidity, and return, rather than its place within an asset class bucket. This removes the need to rebalance through formal allocation reviews and allows investment teams to respond quickly to market events.
“The danger is adopting the language of TPA while maintaining the operating habits of SAA”
Keith Viverito, managing director, Clearwater Analytics
The shift is akin to the switch from analogue to digital – the potential is genuinely transformative, but only if the underlying systems evolve with it. New Zealand Super illustrates what evolution can look like. The fund has been able to act opportunistically during periods of market stress – deploying capital when assets were mispriced rather than waiting for a formal asset‑allocation review. It is a credit to them that after fifteen years of shifting to TPA, they still do not see the transition as “done”.
Full operational rethink needed
The danger for CalPERS and other funds is adopting the language of TPA while maintaining the operating habits of SAA. TPA is gaining momentum as it is agile and adaptive. It is fundamentally at odds with asset class silos, or approval cycles built for quarterly decision-making. Monthly committee meetings simply aren’t built for a world where opportunities disappear by the time the agenda is sent around. Without a fundamental operational rethink, the benefits of TPA cannot be realised.
Missed opportunities could become more commonplace if funds continue to make purely cosmetic changes. Some institutions have rebranded as total portfolio funds while continuing to measure performance and assign accountability along traditional asset class lines. Without fundamental changes to delegation or data infrastructure, investment teams are still being constrained by the same bottlenecks. The result is a fund that looks modern on paper but behaves much as it always has.
Announcing a move to TPA is easy; implementing it is anything but. Moving from siloed, month-end reporting to a single, real-time view of every position across a $579bn fund is a daily operational challenge. It requires unified systems, integrated risk engines, and data infrastructure capable of supporting cross-asset workflows. The promise of TPA is nothing without the plumbing.
The question for 2026 isn’t whether CalPERS can make a bold resolution. It’s whether it can keep it and turn bold words into better pensions.
Keith Viverito is managing director, EMEA at Clearwater Analytics. He previously lead business development for BlackRock’s Aladdin business across EMEA.
