The next frontier for the Total Portfolio Approach (TPA) is a holistic integration of public and private markets into a proprietary and analytical framework, according to Steven Meier, the chief investment officer of the $295.51B New York City Retirement Systems and deputy comptroller for asset management at the Office of the NYC Comptroller.
“Whether you’re a private or public equity manager, long-term returns are going to be driven by key global macro trends (decarbonization, demographic shifts, deglobalization, transformational technology, artificial intelligence, geopolitical conditions, sovereign debt levels, etc.) and their impact on growth, inflation, productivity, government spending, and private investment. These impacts will be experienced in different ways and timeframes for public and private equity investors,” he said. “But it’s still equity.”
Since joining Comptroller’s Office three years ago, Meier — has overhauled how investment decisions are made. Together with Ed Berman, the head of public markets and portfolio construction, the two developed an analytical framework and quantitative tools for evaluating actual portfolio outcomes over an extended time horizon. This was achieved through adding and integrating three senior quantitative analysts into the existing team of fundamental asset class specialists.
Meier said their work uncovered the potential to reap clear benefits by way of increased cross-collaboration across public asset classes, resulting in a more informed portfolio construction approach. The goal was to embed analytical discipline and first principles thinking across the entire portfolio. “What can we know with certainty? What can we prove quantitatively? And then from there, how do you make portfolio decisions?”
That philosophy now underpins public markets, where his team blends fundamental and quantitative tools to better understand exposures, themes, and macroeconomic risks in real time.
TPA, Meier said, doesn’t replace Strategic Asset Allocations (SSA), it’s compatible with it. “Strategic asset allocation is more backward-looking,” he said. “It assesses asset-class returns, volatility, and correlations over a 20-plus year timeframe and a historical basis that we know won’t be repeated. TPA takes these inputs and applies an intellectual rigor on how the future may differ and possible portfolio outcomes under various scenarios.”
While public markets — 71% of the portfolio — are the current focus, Meier sees clear potential for enhanced collaboration across public and private assets, and positioning for public and private market convergence. For example, one opportunity under consideration to enhance performance is an allocation of their public investment-grade bond holdings into private debt investment-grade involving asset-backed finance strategies. Here, he believes he can pick-up another 160-180 basis points in liquidity and complexity premia without compromising the overall liquidity profile of portfolios. “It’s about leveraging opportunities to position and construct portfolios more intelligently,” he said.
In addition to developing quant tools and analytical discipline, the CIO has made organizational changes designed to encourage increased collaboration and cross-portfolio thinking. Meier has also invited and empowered his investment teammates to think holistically about the portfolios, with a top-down view of exposures, performance drivers, and risk factors impacting positioning and outcomes, from a non-siloed mentality.
He said core components of the TPA initiative is to quantify and understand the portfolio’s total exposure to sectors and rate sensitivity, such as with the healthcare sector investments across public and private equity or debt exposure within its private real estate and infrastructure holdings. ”Artificial intelligence is expected to accelerate this transformation. We’re just scratching the surface. It’s going to have incredible application through the investment process, the management of data, looking at exposures.”
Still, Meier noted the investment office is a government agency, which typically isn’t on the forefront of information technology spend. But AI’s potential lies in scenario modelling, stress testing, and custom reporting across the system’s five individual pension plans, he said, noting each plan has its own risk profiles, consultants, and investment policies. He highlighted customization as one of the real advantages of AI.
He acknowledged confidentiality was a still a barrier to full adoption of AI integration, which is why the fund is exploring how external managers use these technologies. “Until you can really protect the confidentiality, we can’t fully move forward,” he said, noting with more than $300B in assets and 800,000 beneficiaries, members of its plans are relying on his team to act in their best interest.
He has presented the build out of his holistic analytical framework and organizational changes to the various plans during monthly meetings, but he reiterated that he is still hesitant to label these initiatives as an alternative approach to SSA. Even without the official label, he’s confident the efforts are consistent with the investment team’s mandate, which is to support the boards in achieving better portfolio outcomes with improved transparency and risk metrics.
Still, he’s cautious about centralizing too much authority and compromising the role of the Boards of Trustees. “Some professionals interpret a TPA approach to give the CIO more discretion over portfolio decisions – I think this is dangerous,” he said. “No one has a crystal ball to tell them how to position the portfolio with precision. This is about being risk and exposure aware across the aggregate portfolio, and testing for potential outcomes under alternative scenarios and stresses.”
“Not everybody moves at the same pace as the CIO,” he said, “but if you get this right, I think you’re going to be much better positioned for performance over time.”
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