Why does the CPP Investment Board use a Total Portfolio Approach instead of specific asset allocations?
In order to meet our value-added investment objectives, we focus primarily on the performance of the total portfolio rather than the performance of isolated asset classes or individual investment departments. We strive to make the total portfolio as efficient as possible by considering proposed investments in terms of their marginal risk/return contribution. Under this approach, we do not target specific dollar or percentage allocations for individual asset classes. Active investments, such as real estate, infrastructure, private equity and private debt are made only if we are confident that their risk/return characteristics will outperform the assets that must be sold to fund the investments. This approach leads us to make decisions in the context of the characteristics and performance of the total fund, hence the name Total Portfolio Approach. We believe it promotes better investment decision-making.
