This week, CalPERS became the first US pension fund to adopt TPA as an investment model, replacing the Strategic Asset Allocation (SAA) model which still dominates the industry. TPA advocates argue that this more flexible approach delivers higher returns for the same amount of risk.
Liability-driven asset owners are constrained by their obligations, so the practical implications will likely turn out to be subtle. But this doesn’t mean that GPs can ignore them in their fundraising and reporting exercises.
Pitching your asset class is more important than ever. LPs using TPA should have more flexibility in their allocations towards different strategies. This may open new possibilities for funds which don’t easily fall into well-defined allocation buckets today.
Have you spoken to your LPs about this shift? Are they already incorporating dynamic portfolio construction alongside SAA?
