Institutional investors are continuing to rethink the foundations of their portfolio management models as markets shift and regulatory expectations intensify.
For decades, many pension funds and other large asset owners have relied on Strategic Asset Allocation (SAA) as the central organising principle for long-term investing. However, growing volatility, fast-moving policy landscapes and the need for greater flexibility have pushed traditional constructs to their limit.
As a result, investors are beginning to explore a more unified framework known as the Total Portfolio Approach, or TPA, which takes a mission-driven view of the entire portfolio rather than treating assets in isolation.
Ortec Finance, which offers solutions for risk and return management, recently released a report exploring TPA for institutional investors.
The appeal of TPA is often discussed through the lens of its analytical sophistication and the operational changes it requires. Yet its real strength lies in governance, Ortec said. Without clear decision-making arrangements, meaningful accountability and a shared cultural understanding of long-term objectives, the model becomes difficult to sustain. Governance shapes how investment beliefs are expressed, who is responsible for what, and how organisations adapt when external pressures test their resilience.
Ortec Finance has long championed an investment philosophy built around viewing the portfolio as a cohesive whole. Rather than treating SAA and TPA as competing doctrines, the firm promotes a hybrid structure that draws strength from both.
Analysis included in the firm’s latest report suggests that many clients already operate with elements that resemble a hybrid model.
For these investors, transitioning to a full TPA is not only feasible but increasingly realistic. The shift, however, depends on several enablers being put in place. Strengthening governance processes is considered essential, ensuring decisions are timely, consistent and anchored to long-term objectives. Expanding the use of factor exposures can also enhance transparency and help investors understand what really drives performance across the whole portfolio.
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