Stephen Gilmore – CalPERS' Total Portfolio Approach (EP.486)

Stephen Gilmore, CIO of CalPERS, elucidates the Total Portfolio Approach (TPA) to investment management, drawing from his experiences at Australia's Future Fund and New Zealand Superfund. He contrasts TPA with strategic asset allocation, emphasizing TPA's focus on achieving ultimate objectives rather than adhering to defined asset class buckets. Gilmore highlights CalPERS' shift towards TPA, aiming for a more stable risk appetite and increased management accountability. He advocates for a 75% equity, 25% bond reference portfolio and discusses the importance of a common language for comparing diverse investments, considering factors like equity beta and illiquidity premiums. Gilmore also touches on the role of scenario analysis in stress-testing the portfolio and the benefits of scale in negotiating favorable economics.