Chief investment officer of the $225 billion Teacher Retirement System of Texas Jase Auby has voiced reservations about the total portfolio approach, particularly regarding the robustness of its central feature, the top-down decision-making process.
As CalPERS became the first US public pension fund to formally adopt the TPA, its peers from other states are closely monitoring the implementation process and what kind of portfolio benefits the approach would bring. But at a special board presentation on TPA in TRS’ February board meeting, Auby, who has been with the fund for more than 17 years, explained why the TPA philosophy diverges from his investment management belief.
“I do have the opinion that top-down decision-making is a more brittle process, you are kind of relying on one person or one small team of people,” he said during the meeting held at TRS’ Austin office.
“[This centralised portfolio thinking] is a little bit at odds with the journey we’ve been on at TRS for the last six years.
“Something I’ve really prioritised – it’s probably been my top priority – is kind of the opposite, which is… pushing authority and autonomy as deeply into the organisation as possible to give everyone at TRS autonomy within their area, as it’s well-defined with good risk control, to really push that decision making down.”
Auby also called into question the efficacy of TPA in improving risk-adjusted returns. He cited a 2020 paper from the Thinking Ahead Institute which concluded that TPA added 50-150 basis points in incremental return over SAA but flagged those estimates as “aggressive”.
It’s worth noting that a more recent study from TAI in 2024 suggests the TPA value-add over SAA is even higher, at 180 basis points per annum over 10 years. In an interview with Top1000funds.com, CalPERS CIO Stephen Gilmore says while that number is likely optimistic, he is targeting a 50-60 basis point uplift in alpha after TPA is deployed at the fund.
Does DAA work?
For some practitioners of TPA, dynamic asset allocation is one of the so-called ‘top of the house’ tools made possible by the approach. Auby highlighted NZ Super as one of the only asset owners that consistently reports the value-add it gains from the program. According to NZ Super’s 2025 annual report, its strategic tilting program is by far the biggest alpha driver for the fund as it added close to 100 basis points of active return annually over the past five years.
But Auby said DAA is not an area TRS prioritises – or wants to prioritise. He said TRS terminated its dynamic asset allocation activities in 2017, in a decision made by then CIO Jerry Albright to whom Auby was the deputy, after what were largely “8 years of futility”.
“We didn’t lose much money in the fund or anything doing it [during that period], but we never were able to prove a durable and long-lasting source of alpha for the trust by doing that,” he said.
“You know, sometimes don’t just do something, stand there. If you’re doing something that’s not working, stop doing it.”
Auby said compared to DAA, which he described as a “low breadth activities”, generating alpha through security selection is a more consistent approach for TRS.
“The math of trying to get alpha is, if you’re for example managing the S&P 500, and you can make 500 [active] decisions – it’s called breadth if you have many, many more decisions to make – that would result in a much more robust process, and better and more durable alphas than a process where for example you might only be making five decisions,” Auby said.
“And that tactical asset allocation decision-making is basically five decisions. It’s like: stock versus bonds, emerging markets versus developed markets, non-US versus US, private markets versus public.
“There just aren’t enough decisions and the decisions themselves are so consequential, it’s quite difficult to make money.”
The fund returned 15.9 per cent in the year to December 2025 and added 176 basis points of excess return but Auby didn’t share a breakdown of alpha sources. The prices of silver and gold, to which the fund has a 1.6 per cent allocation, have seen stellar rises to return 139 and 63 per cent respectively in the 2025 calendar year.
“Our alpha without that [DAA] activity has been very healthy – we have some of the highest alphas amongst public funds,” he said.
“It’s worked out well for us. But just because it’s worked out well in the past doesn’t mean we won’t continue to look at it.”
TRS has 58.83 per cent allocated to global public and private equities, 20.62 per cent to stable value assets (including bonds, absolute return and stable value hedge funds), 20.46 per cent to real return (real estate, infrastructure and commodities), and 4.82 per cent to risk parity strategies. The fund was 4.72 per cent leveraged.
