Culture, governance and stakeholder buy-in are the top barriers to TPA adoption across global pension funds, says ICPM’s Adrian Trollor
The Total Portfolio Approach (TPA) has recently become a fixture of institutional investment conversations, yet the model remains difficult to pin down as recent research has found funds that claim to practice TPA are implementing it in starkly different ways. As a result, the lack of a single coherent framework is creating confusion across the pension industry.
A new paper from the International Centre for Pension Management attempts to cut through that fog. Adrian Trollor, managing director at ICPM, said the research uncovered a broad range of implementations rather than anything resembling a standard playbook.
No standard playbook for TPA implementation
“We discovered many varieties of different approaches to TPA,” said Trollor. “To try and frame that up, we landed on these key enablers and these key levers,” said Trollor, noting governance reform, a total portfolio management lens, the right culture and real-time aggregated risk data form the model's core infrastructure.
“The variety of implementation approaches comes from how people within their organizational context pull on those various levers and it’s through that lens that you get these broad practical implementations of TPA. If everyone's doing strategic asset allocation, they've got a board approved allocation with perhaps a range around it to an asset class. When people are doing TPA, they're doing it in very many ways,” said Trollor.
“We're not casting any sort of comment on whether that's right or wrong, but I think it just reflects the different organizational contexts that those TPA adopters have come from,” he added.
Two different TPA models, one outlier
The paper maps those differences onto a spectrum running from fully integrated to partially integrated models, according to Trollor. At one end sits Australia's Future Fund, which had the rare advantage of building from scratch. At the other end is CPP Investments, which the paper characterizes as a partially integrated model.
The partially integrated model, as Trollor describes it, is one where TPA's core DNA - its culture, governance and decision-making framework - exists but is confined to a specific part of the investment process. Central decision-makers handling risk and asset allocation may operate with a total portfolio mindset, but that same thinking doesn't necessarily extend to the large specialist teams deploying capital into asset classes, particularly in private markets. As Trollor explained, those teams can function with a different culture and structure than the one driving portfolio-level decisions at the centre.
Still, the lack of clarity persists. When asked why pension plans struggle to define TPA coherently, Trollor believes it has to do with the model's relative youth.
“I think we're still pretty early on in the evolution of TPA and I think organizations are necessarily starting from their context and evolving,” he said. “I'm struggling to think of another fund around the globe that sort of started from that Australian Future Fund context.”
Culture, not capital, the real barrier to TPA adoption
Moreover, the challenges that come with adoption aren’t trivial. According to Trollor, culture was the most cited challenge across the research, and not just among funds still finding their footing. Even mature TPA adopters flagged it. The difficulty, according to Trollor, isn't establishing the right mindset — it's preserving it as organizations expand, open new offices and add headcount. Trollor, who has worked inside a TPA-adopting organization, said that resonated with his own experience.
The second challenge is stakeholder management. A sovereign fund with a single government counterpart operates in a different reality than a pension plan accountable to multiple trustee boards, each carrying varying degrees of investment sophistication. That dynamic makes any kind of organizational change harder, Trollor suggests, because every stakeholder needs to be brought along within a limited window.
But it’s governance that Trollor identified as the key area where TPA demands the clearest break from traditional models, emphasizing boards can't keep operating the way they did under strategic asset allocation.
To that end, he underscored that delegation framework between board and management needs to be rethought. That doesn't necessarily mean boards hand authority down or management cedes power upward. What matters, he said, is that the board stops fixating on individual asset class allocations and instead focuses on the total portfolio: what it's designed to achieve, what stakeholders expect from it and what metrics matter most. In turn, management needs a clear mandate within that framework to execute the TPA approach.
Still, the challenge is that governance structures vary widely across funds, noted Trollor. Some boards remain active investment decision-makers but orient those decisions around the total portfolio while others step back from investment calls altogether and concentrate on setting risk parameters, delegating the rest to management.
“An investment model is not something that caters necessarily to one trustee board wanting one approach and another one wanting a different approach. So you've got to bring those stakeholders on board,” he said, underscoring getting the model wrong early carries consequences that compound over time. Bringing stakeholders along from the outset - rather than retrofitting their buy-in, Trollor suggests, is where the real work begins.
Yet, according to Trollor, TPA isn’t uncharted territory. Enough funds have adopted it across a wide enough range of investment models that the collective experience base is substantial.
“This is not a cutting-edge innovation anymore. There are significant numbers of funds that have implemented TPA and have been successful in doing so,” he said.
Why a successful TPA model requires extensive research
Trollor's advice for pensions who have yet to implement TPA is to find a fund that has moved in a direction that fits their own organizational context and study how they did it. Many funds that have started the TPA journey began exactly that way: engaging with peers, understanding the range of approaches, and then translating those lessons back into their own structure to determine what fits.
“It's a real strategic shift and with strategy,” he said. “It's worthwhile to take your time and doing your research upfront and exploring the various models that exist and understanding why they exist,” he added, emphasizing that TPA is not something a fund can stop, start or reverse.
The ultimate implication is that most adopters will settle into a hybrid or partially integrated version of TPA. Not because it's ideal, but because their legacy structures demand it.
“I think it's too early to say whether one of those approaches are better than others, but it's definitely the case you can say that some of those suit the different organizational structures more than others,” he added.
