Large asset owners such as pension funds are not often associated with being nimble – they are frequently likened to tankers which take their time to change direction. However, the current volatile, uncertain environment may be forcing their hand by demanding greater levels of agility than we have historically seen.

Though long-term objectives remain central to the way pension funds invest, the pressure to respond to short-term risks and geopolitical dynamics is shaking some out of institutional inertia, shining a spotlight on their tactical allocation abilities.

During his keynote speech at the Financial Times Future of Asset Management North America Summit, Ontario Teachers’ Pension Plan CEO Jo Taylor said: “As an international investor it is a very complicated landscape at the moment and the populism and politicization of the world is as strong as I have ever seen it,” adding that there is a critical need to have an agile investing approach.[1]

Political challenges and growing global fragmentation are requiring institutional investors to sharpen their focus on responding to short-term challenges. This means adapting not only their investment approach but adapting aspects of their culture too.

CalPERS Chief Investment Officer Stephen Gilmore explains in a recent Q&A published on its website: “The most challenging thing is encouraging organizations to change and adapt. Often there are ways things are done, there are entrenched views and processes. The hard part is bringing people along and getting buy-in and executing. People will say, ‘We’ve always done it this way,’ and that kind of thinking should change.” [2]

Gilmore is also seeking to change CalPERS’ investment strategy, hoping to launch a total portfolio approach (TPA) by July 2026 – a significant shift away from the strategic asset allocation (SAA) approach it currently employs.

During the fund’s February board meeting,[3] Gilmore explained that TPA is innovative because it’s a more continuous approach that optimises risk-return at the whole portfolio level for more efficiency, Top1000funds.com reports.

This approach to investment is slowly but surely edging its way into institutional investors’ modus operandi, in light of growing portfolio complexity and less stable macroeconomic and political systems. It offers a more dynamic, integrated way of continuously seeking the best investment opportunities with real-time governance and a more flexible, holistic view of the portfolio.

“While SAA seeks to outperform benchmarks, TPA focuses on the fund’s absolute-return goals. While SAA seeks diversification via asset classes, TPA wants diversification through control of various risk factors,”[4] explains an article in Pensions & Investments.

Adopting TPA also requires a shift in organisational culture. This was something highlighted by attendees at the MSCI Institutional Investor Forum in Montreal, according to a post on the MSCI website[5]. “Paramount to success, they agreed, is a comprehensive plan to change their internal culture: Creating a collaborative environment that breaks down silos between all different asset-class specialist investors, the broad investment team and the risk-management team, and even between a plan’s investment management group and governing board”.

The Intesa SanPaolo pension fund is also redefining its approach, taking a more defensive route, reports IPE ^[6]. In its effort to diversify further in the face of a “deeply uncertain” macroeconomic environment, the fund handed down €700m in mandates for defensive multi-asset strategies designed to mitigate tail risks.

In a recent update of its investment policy document[7], the fund said: “The short-term outlook is becoming increasingly complex and markets are difficult to interpret, particularly in equities, where events such as trade and geopolitical tensions are outweighing macroeconomic data… As a result, adopting a more cautious risk profile allows for better planning of portfolio developments over the next 6–9 months.”

Whether through organisational reform, redefining risk appetites or reshaping internal culture, pension funds are demonstrating that agility is now a core skill as responsiveness becomes a critical consideration.

Angele Spiteri Paris is a senior research consultant at CoreData Group, a global specialist financial services research and strategy consultancy. To find out more about our industry insights and research programmes, you can reach her at [email protected]

[1]Agility is key to navigating today’s complex investment landscape

[2] https://news.calpers.ca.gov/qa-with-calpers-chief-investment-officer-stephen-gilmore/

[3] CalPERS board ponders the risks of TPA – Top1000funds.com

[4] Large institutional investors embrace total portfolio approach, a new and innovative way to construct a portfolio – Pensions & Investments

[5] How Asset Owners Are Redefining the Total Portfolio Approach | MSCI

[6] https://www.ipe.com/news/intesa-sanpaolo-pension-fund-awards-700m-in-tail-risk-mandates/10131411.article

[7] documento_politiche_di_investimento_-_dpi_29_aprile_2025.pdf