As the total portfolio approach grows in popularity with asset owners around the globe, a number of claims are being made by its users and proponents about how much performance it can add over the traditional strategic asset allocation model.  
 
But Paul Newfield, deputy director of consulting at Frontier Advisors believes that a good governance structure is a more reliable driver of returns than which portfolio construction method an asset owner adopts. 

“There’s a more systematic and provable dividend that comes from good governance as opposed to TPA versus SAA,” Newfield told the Frontier Advisors conference on Thursday.  
 
“I don’t think TPA is necessary. I think if you’ve got good governance and you don’t miss out on capital allocation decisions and you’re thinking cross-sectionally in your portfolio, that leads to better decision-making, that then engenders better investment outcomes and better risk management.” 
 
But Alicia Gregory, managing director at Blue Owl and former deputy chief investment officer of the Future Fund, said that there are performance-additive decisions that get made with a TPA mindset that would be a lot harder under a traditional SAA framework.  
 
Gregory pointed to the Future Fund’s $8 billion secondary sale of its private equity portfolio in 2020, which took “every resource” in the private markets team to pull off but which was done on the basis that it believed interest rates would rise and that PE would be hit hard (the fund bought equities as it sold to make sure it wasn’t changing its risk profile).  
 
“I could run the attributions but just looking at it is hugely accretive to the portfolio… that only gets done with really high conviction; that the cost of doing this, if we’re wrong, won’t hurt us, but if we’re right, it’ll have a big benefit,” Gregory said.  
 
“You’re not changing the risk profile, you’re not giving anything up, but that’s the example I would give you, when you look at those reports, that you can attribute decisions to, and that decision continues to pay dividends; I looked at their latest result and I can break it out and attribute it.” 
 
Gregory also questioned the narrative that TPA had a “free rider” problem where 
it’s possible for underperformers to ride the coattails of stronger-performing team members due to how performance is attributed at the total portfolio level.  
 
“[Under an SAA framework], when a decision was right, everyone owned it, and when a decision was wrong it was the asset allocation, it was this, it was that,” Gregory said. “The cultural element of TPA, which is that you own it together – there are pros and cons for that.  
 
“You’ve got to have the right people in the right seats to make this work, but the concept is you’re owning it as a collective. You can have free riders, you can have people washing their hands, but in my experience, whether you’re under SAA or TPA… it’s the same under both models.”