Whether your preferred medium is a cassette tape, a CD, or streaming, when it comes to music, we are all in pursuit of the same holy grail: The perfect playlist. But what does perfect really mean? The perfect playlist is constantly changing based on mood, preference changes, our lived experiences, innovation and collaboration. At any given point in time, our goals might be different. We might be trying to evoke an emotion, convey a message, or just survive a 30-minute jog. Regardless, your approach to creating a playlist must be flexible and fluid. You may select from various genres, various artists, and various eras to find songs that flow well together and share similar themes, all in the spirit of meeting your goals.
Taking a total portfolio approach (TPA) is like curating the perfect playlist. In TPA, asset owners take a holistic view of a portfolio’s ultimate objectives, looking past traditional constraints, such as asset class buckets that must be filled. Asset owners consider the current environment and full opportunity set to optimize the total portfolio’s exposures to various risk and return drivers.
TPA has been core to our investment philosophy at WTW. Our investment process has evolved over the last 40 years, with our focus on TPA growing over that time. Let’s take a closer look at what TPA is, how it can be implemented, and how it can add value through some common questions.
Conclusion
A lot has been presented in this piece in favor of TPA and the potential benefits of adopting it as a framework. But it is critical to remember that TPA is not as simple or as fast as streaming a song that came to mind. TPA lives on a spectrum along with SAA, and movement from SAA toward TPA can be continuous and gradual, but it must be done with aligned interest, organizational context, and thoughtfulness. Over the next several months, we hope to introduce further thought pieces to explore different aspects of TPA and how you might start to build your own perfect portfolio playlist.
Footnotes
- Source: Thinking Ahead Institute study as of 2019. Past performance is not a reliable indicator of future returns. Return to article
- Source: Thinking Ahead Institute survey as of 2024 Return to article
Disclaimer
This document is based on information available to WTW at the date of issue, and takes no account of subsequent developments. In addition, past performance is not indicative of future results. In producing this document WTW has relied upon the accuracy and completeness of certain data and information obtained from third parties. This document may not be reproduced or distributed to any other party, whether in whole or in part, without WTW’s prior written permission, except as may be required by law. Views expressed by other WTW consultants or affiliates may differ from the information presented herein. Actual recommendations, investments or investment decisions made by WTW, whether for its own account or on behalf of others, may differ from those expressed herein.
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