The world’s largest pension funds are adopting a total portfolio approach (TPA) in the face of an uncertain investment environment and interconnected risks, according to the Thinking Ahead Institute’s (TAI) latest Global Pension Assets Study.
Funds are increasingly shifting away from strategic asset allocation to enable greater flexibility and adaptability, said the TAI. They are turning to approaches “better suited” to handling interconnected risks that cut across asset classes, including inflation, liquidity, concentration, systemic and climate risks.
The report also said resilience was emerging as a key principle, referring both to the robustness needed by portfolios to withstand adverse conditions and the organisational capacity required to “anticipate, adapt and learn from emerging threats”. Growing uncertainty over climate, geopolitics and other systemic risks required a dual framing across schemes’ asset mix and their capability to navigate an increasingly volatile environment, it added.
Global pension assets rose by 9.6% year-on-year to reach a record US$68.3 trillion in 2025, due to a sustained recovery across global markets. Defined contribution schemes now account for 63% of all assets across the largest seven pensions markets globally, but they only represent a majority of assets in the US (90%) and Australia (72%).
The US remains the largest single pensions market, with Canada overtaking Japan in second following 12% year-on-year growth in 2025.
The institute said TPA had reached “a defining moment”, partly due to the size of the portfolios, citing its adoption by CalPERS, the largest public sector scheme in the US, as evidence the concept had entered the mainstream.
“This shift reflects a growing recognition that managing today’s portfolios requires whole-portfolio decisions rather than asset-class optimisation and organisational and portfolio resilience rather than managing volatility and tracking error risks.”
With TPA, asset performance is judged in terms of how the exposure contributes to overall objectives, rather than how it compares individually to its benchmark.
“TPA supports more coherent portfolio construction by clarifying the role of each exposure, the next unit of risk the fund is willing to take, and the trade-offs between private-market opportunity, liquidity and long-term resilience,” the report explained adding that its focus on integrated decision-making and improved data helped investors manage more effectively over time.
It noted that TPA enables faster and more coordinated decision-making, which is needed in an era of “rapid technological change and rising political and systemic risks”.
TAI said large pension funds were boosting resilience through use of tools and practices that help them to better understand how systemic risks interact and evolve, such as macro-foresight, horizon scanning and scenario analysis.
“As systemic risks become more interlinked and unpredictable, resilience hinges on building adaptive systems rather than relying solely on historical patterns or traditional risk measures,” it said.
“The 2026 outlook is likely to be shaped by policy decisions, technological innovation and shifting global dynamics. Fiscal support and AI-related investment should remain important growth drivers,” said TAI Director Jessica Gao.
