CalPERS Adapts a Total Portfolio Approach

In November 2025 CalPERS, a $600 billion pension plan, announced it would adopt the Total Portfolio Approach.

The model rethinks portfolio construction. “Instead of starting with a fixed split, such as 60% stocks and 40% bonds, it begins by examining how different investments behave…..The goal is a portfolio that behaves more predictably when markets get rough.”

“The Total Portfolio Approach (TPA) is a holistic investment strategy that integrates all assets into a unified portfolio, focusing on overall performance rather than managing asset classes in isolation.”

To accomplish this, the Total Portfolio Approach (TPA) groups investments by risk. The approach looks at how an investment acts in different market environments.   This alters the distinction of stocks and bonds.

If you think this can get complex, you are correct.   TPA may look at 6 or more risk factors.

I understand that TPA, at its core looks at two factors, Growth and Stability. From this perspective, high yield bonds are considered growth investments because they tend to behave more like equities during market downturns.

On the other hand, Value stocks such as the Dividend Aristocrats behave more like Stability assets.

This is somewhat intuitive, and investors have used stable, dividend paying companies to improve their portfolios for decades.  However, in practice attempting to follow the TPA metrics may be difficult and TPA isn’t perfect.

I suppose, if simplified, it will provide another way to view portfolio makeup and diversification.

Younger investors may not be interested in stability.  However, as I approached age 60 I shifted to viewing my retirement portfolio as a pension fund, and I made periodic changes to improve stability.  I’ve noticed my portfolio doesn’t react to market downturns as might be expected based upon the allocation of stocks/bonds/cash.