Rethinking how TPA is evaluated

The Total Portfolio Approach (TPA) is reshaping how large institutional investors manage their portfolios, giving investment teams greater flexibility to manage risk and opportunities across entire portfolios rather than within individual asset classes. But can its benefits actually be measured?

New research by McGill Desautels Professor Sebastien Betermier and his co-authors suggests the answer is more complicated than many assume. Their study finds that even skilled funds with well-constructed portfolios can underperform simple stock-and-bond benchmarks for years due to statistical noise, much of it driven by diversification itself.

The findings highlight the challenges of evaluating total portfolio performance using conventional benchmarks and raise important questions about how investment success should be assessed over time.