Cross Asset Systematic Highlights: Show Me the Way: A North Star for the Total Portfolio Approach

Research evidence excerpt

Cross Asset Systematic Highlights: Show Me the Way: A North Star for the Total Portfolio Approach

Thomas Salopek AC Global Markets Strategy

(1-212) 834-5476 28 July 2026 J P M O R G A N

thomas.salopek@jpmorgan.com

Celestial Navigation for the Total Portfolio

Approach

To be clear, there’s a lot to like about the TPA approach. First is the appreciation that

there are a number of important considerations beyond the standard performance

metrics. For instance, we ought to rightly worry (simultaneously!) about a list of things

that complement or contradict one another, the funding ratio, expected shortfall

probability, max drawdown, liquidity limits, risk concentration, implementation

intensity and cost, de-risking, dynamic risk budgeting, risk appetite, etc. As the

emphasis for each of these choices varies by organization, descriptions of the TPA can

be vague as they leave it to the investor to customize.

Conversely, there’s a lot to dislike about the siloed approach (not to be mean). In

particular, the silos, by virtue of being internally focused, can be oblivious to the

broader cross-asset opportunities. The silo view may be connected to a number of

selfish considerations that do not benefit the overall fund. Suppose an employee’s

prestige or compensation is tied to the size of their allocation in the portfolio. Narrowly

optimizing for the best results in one asset class vs its benchmark can lead to poor

diversification for the overall portfolio and missed cross-asset opportunities. The silo

approach is still very common in the industry, leading to duplication of exposures across

silos and undesirable risk concentrations. The cross asset view in siloed organizations

may just be the copy-pasted view from the individual silos, whereas ideally a true cross