Can you benefit from taking a total portfolio approach?

As the complexity of global capital markets continues to increase, a total portfolio approach (TPA) to portfolio construction has gained prominence amongst leading global pension plans and sovereign wealth funds. 

An evolution of traditional strategic asset allocation (SAA), TPA shifts the emphasis of capital allocation decision-making away from traditional asset classes in favour of a holistic view of the investment portfolio. It refocuses assessment of investment performance from benchmark-relative comparisons to total portfolio performance objectives. Both enhancements allow for a clearer understanding of portfolio risks and opportunities, greater agility in the face of shifting economic risks and stronger long-term outcomes.

While generally not considered practical for an individual retail investor to implement fully due to its complexity, retail investors can benefit from adopting certain elements of its philosophy.

A full TPA demands a deep understanding of the many risk factors that can influence the performance of a portfolio, how they interact with each other and how those interactions can change over time. This requires access to a level of data and a degree of expertise individual investors don’t often possess. In addition, in order to add value, a TPA aims to be suitably exposed to a diverse range of investments, including alternative investments. Many of these are not readily available to all investors.

While full implementation may be impractical, retail investors can incorporate TPA principles into their own strategies to improve outcomes:

• Focus on total portfolio outcomes and prioritize your overall financial goals — such as retiring with confidence — over how individual investments perform relative to a benchmark.
• Adopt a risk-first mentality and emphasize managing your total portfolio risk and understanding how different investments interact with each other, rather than chasing returns in isolation.
• Be dynamic and flexible. Be willing to adjust your portfolio’s strategic asset allocation based on your evolving life stage, market conditions and economic forecasts.

Perhaps most importantly, seek the advice of your CIBC representative or advisor. They can help you apply a more integrated, goal-oriented approach to your investment portfolio to help achieve your objectives, including investing in one of our many managed solutions.

At CIBC Asset Management, our managed solutions — including mutual funds — follow a dynamic, purpose-centric approach to portfolio construction. This means we actively manage overall risk exposures across the whole investment mix and seek out medium-term investment themes that have the potential to really matter over time. For example, we might adjust a solution to take advantage of trends like global trade shifts or supply and demand imbalances in real estate. This approach is not about chasing short-term return enhancements. Instead, it’s about making thoughtful adjustments that can improve the portfolio’s alignment to long-term objectives and prepare it for future opportunities or challenges.

Learn more about the total portfolio approach in CIBC Asset Management’s Maximizing client-focused outcomes in a Total Portfolio Approach: The role of currency (PDF, 740 KB) Opens a new window..