Stephen Gilmore – CalPERS' Total Portfolio Approach - Capital Allocators – Inside the Institutional Investment Industry Recap
Podcast: Capital Allocators – Inside the Institutional Investment Industry
Published: 2026-02-09
Duration: 58 min
Summary
Stephen Gilmore discusses the importance of a total portfolio approach (TPA) at CalPERS, emphasizing its potential to stabilize risk management and enhance accountability in investment strategies.
What Happened
In this episode, Ted Saides interviews Stephen Gilmore, the Chief Investment Officer of CalPERS, the largest public pension fund in the U.S. Gilmore shares insights from his extensive career in finance, detailing how his experiences shaped his views on risk management and portfolio strategies. A key theme is the tendency for traditional investment practices to be pro-cyclical, often leading to poor timing in risk allocation during market fluctuations. Gilmore argues that long-term investors should embrace risk during downturns rather than retreating, highlighting how the total portfolio approach can provide a more stable risk appetite over time.
Gilmore elaborates on the advantages of having a reference portfolio in a total portfolio approach, which allows for greater transparency and accountability in risk management. He contrasts this with strategic asset allocation, where the lines of ownership and accountability can become blurred. In the TPA model, the management team is empowered to propose and manage the portfolio, resulting in clearer performance evaluation against a baseline. This shift not only fosters better governance but also encourages more proactive investment decisions aligned with long-term objectives.
As Gilmore discusses the challenges of implementing the total portfolio approach at CalPERS, he reflects on the lessons learned from his previous roles at the Australia Future Fund and New Zealand Superfund. The conversation emphasizes the need for adaptability and sound governance structures in today's dynamic investment landscape, making it clear that the total portfolio approach is gaining traction among institutional investors seeking to optimize their asset management strategies.
Key Insights
- CalPERS has historically been too pro-cyclical, reducing risk during downturns when it should have been increased.
- The total portfolio approach enhances accountability by clearly delineating the responsibilities of management in portfolio construction and performance evaluation.
- Implementing a reference portfolio stabilizes risk appetite and improves transparency in investment strategies.
- Gilmore's experiences from previous roles inform his understanding of market dynamics and the importance of governance in investment management.