Feb 9, 2026 · 1h 2m · capital-allocators
Stephen Gilmore – CalPERS' Total Portfolio Approach (EP.486)
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gold bands on the timeline = statements, start to end. Hover to read, click to jump. CC turns on captions
In this episode of Capital Allocators, host Ted Seides interviews Stephen Gilmore, Chief Investment Officer of CalPERS, exploring the fund's strategic transition to the Total Portfolio Approach (TPA), governance modernization, whole-fund risk management, and the organizational dynamics of steering a $600 billion public pension system.
How this conversation actually went
Every chapter scored 0–10 on four independent dynamics. Hover any point for the reasoning behind the score. Ted holds 27.6% of the talking time here. How this is scored →
Ted as informed peer 4.4 Guest teaching 4.1 Guest disagreement 0.6 Ted pushing back 1.6
speaking balance: gold is Ted, purple is the guest (3 minute bins)
Sharpest disagreement ▶ 59:20 Playful rejection of the two-mentor prompt
When asked to name two people who had the biggest impact on his life, Gilmore openly rejects the constraint by stating that those who know him know he doesn't stick to scripts.
Hardest push from Ted ▶ 17:49 Challenging the lack of guardrails in TPATed presses Gilmore on whether TPA lacks the necessary board guardrails and distinct expectation targets present in conventional strategic asset allocation.
Biggest teaching moment ▶ 13:30 Explaining TPA differences between sovereign wealth fundsGilmore educates Seides on how liability duration and initial capital endowments fundamentally separated the systematic reference portfolio at NZ Super from the discretionary mandate at the Future Fund.
Ted holds their own ▶ 21:09 Synthesizing global governance lessons across allocator modelsTed demonstrates deep subject-matter command by comparing Gilmore's transition to insights previously shared on the podcast by CIO peers at NZ Super and Australia's Future Fund.
the scores for every segment, with the reasoning behind each
| Chapter | Topic | Ted as informed peer | Guest teaching | Guest disagreement | Ted pushing back | Why |
|---|---|---|---|---|---|---|
| Preview: CalPERS' Shift to Total Portfolio Approach | 0 | 0 | 0 | 0 | This opening segment consists of a cold open soundbite from Stephen Gilmore explaining governance improvements at CalPERS followed by Ted Seides's solo introductory monologue. As a monologue/teaser, host interaction metrics are scored at zero. | |
| Capital Allocators Premium Subscription Valentine's Promotion | 0 | 0 | 0 | 0 | Host monologue featuring a Valentine's promotional read and multiple sponsor announcements. No conversational interaction occurs. | |
| Early Career Trajectory and Crisis Lessons at AIGFP | 5 | 4 | 1 | 2 | Ted guides Stephen through his Wall Street background and the 2008 liquidity crisis at AIGFP. Stephen shares deep operational insights about implied volatility and repo market freeze risks while maintaining a collegiate tone. | |
| Implementing TPA at Future Fund vs. New Zealand Super | 6 | 6 | 1 | 2 | Ted probes the operational differences between the Future Fund and NZ Super's total portfolio approaches. Stephen educates the audience on how distinct liability horizons and initial funding conditions dictated reference portfolio choices. | |
| The Total Portfolio Mindset vs. Strategic Asset Allocation | 6 | 5 | 1 | 3 | Ted questions how TPA provides sufficient board guardrails compared to traditional SAA. Stephen explains that TPA actually clarifies governance by framing leeway through an active risk budget rather than rigid asset silos. | |
| Global Career Path and Governance Evolution at CalPERS | 6 | 5 | 0 | 2 | Ted cites past interviews with institutional leaders regarding governance challenges, prompting Stephen to discuss how TPA eliminates procyclical tendencies and clarifies board versus executive accountability. | |
| Breaking Asset Class Silos and Aligning CalPERS' Culture | 5 | 5 | 1 | 2 | Ted asks about shifting team skill sets from siloed allocation to fund-wide competition for capital. Stephen highlights the psychological hurdle of breaking benchmark anchoring and creating a common return language across asset classes. | |
| Structuring the 75/25 Reference Portfolio and Opportunity Cost | 6 | 6 | 1 | 3 | Ted drills into the exact mechanics of CalPERS's reference portfolio and pricing illiquidity. Stephen details the 75/25 equity/bond benchmark and explains funding illiquid opportunities against equivalent public market risk baselines. | |
| Implementation, Technology Infrastructure, and Stress Testing | 5 | 5 | 0 | 2 | Ted inquires about internal versus outsourced implementation and the analytical infrastructure required for whole-portfolio transparency. Stephen emphasizes multi-dimensional scenario testing rather than historical backward-looking correlation models. | |
| Sponsor: Ridgeline Investment Management Platform | 6 | 5 | 1 | 2 | Following a brief mid-roll ad read, Ted explores how incremental investment sizing and diversification work under TPA. Stephen explains that individual asset class concentration is tolerable if overall fund-level diversification holds. | |
| Scaling Active Risk, Scale Advantages, and Board Dynamics | 6 | 5 | 1 | 2 | Ted asks about scaling constraints and managing public pension board dynamics where trustees often lack finance backgrounds. Stephen explains that TPA clarifies the board's fiduciary role by focusing them on reference portfolio risk while leaving tactical execution to staff. | |
| Cultivating Collaboration and Fortnightly Fund Governance | 5 | 5 | 0 | 2 | Ted asks how cultural collaboration is fostered across large investment teams. Stephen uses a baseball batting versus slugging average analogy to describe sizing conviction and explains how CalPERS's fortnightly Total Fund Management Committee operates. | |
| Technology Modernization, Macro Trends, and Liquidity Drills | 5 | 6 | 0 | 2 | Ted probes technology utilization and emerging macroeconomic hazards. Stephen describes running simulated liquidity shock drills with cross-functional teams to ensure readiness against unexpected market freeze events. | |
| CalPERS' Strategic Horizon and Purpose-Driven Investing | 5 | 4 | 0 | 1 | Ted and Stephen discuss long-term strategic objectives for CalPERS and the intrinsic motivation of public pension stewardship for 2.4 million beneficiaries. | |
| Strategic Investment Spotlight: Thema | 4 | 4 | 2 | 1 | After a brief spotlight on portfolio company Thema, Ted conducts the closing question round. Stephen playfully rejects the premise of naming only two mentors, citing several key leaders who took risks on him. | |
| Episode Conclusion and Legal Disclaimers | 0 | 0 | 0 | 0 | Solo host closing remarks and legal compliance disclaimer monologue. |
Statements from this episode (24)
Gilmore: AIGFP had great people and Joe Cassano was super smart
“One of the things that really impressed me was the quality of the people at AIGFP. They had really good people. I thought a lot of Joe Cassano, who ran the place. He was super smart, very knowledgeable across many things.”
Gilmore: AIGFP halted new super senior transactions in late 2005
“In the case of FP, They stopped entering into new super senior transactions of that elk from late, 2005, well ahead of the final denouement in 2007, 2008. It wasn't soon enough.”
Gilmore: Future Fund Benefited from 2008 Crisis Due to Low-Risk Entry
“The Future Fund has actually been one of the beneficiaries of the financial crisis because it had a low risk portfolio going into the crisis. So it had a lot of cash to invest when assets were very cheap.”
Gilmore: NZ Super Uses a Reference Portfolio While Future Fund Does Not
“In the case of New Zealand Super, Turtle Portfolio Approach, they have a reference portfolio. Future Fund, Turtle Portfolio Approach, doesn't have a reference portfolio.”
Gilmore: CalPERS' legacy SAA permitted ~450 bps of active risk
“What we did was to look at how much that variation would aggregate up to in terms of the leeway management had been delegated. We estimated that that amounted to around about 450 basis points of active risk using all the policy ranges.”
Gilmore: CalPERS seeks deployment flexibility rather than increased active risk
“With the transition to a total portfolio approach, we weren't asking for that much active risk. We were asking for more flexibility in how we used it.”
Gilmore: CalPERS historically destroyed value through pro-cyclical de-risking during crises
“One of the things that has attracted value from the CalPERS experience has been a tendency to be too pro-cyclical. If you think back to the time of the financial crisis, Various assets were liquidated. Risk was taken off. That was done in part because of conce…”
Gilmore: Total Portfolio Approach stabilizes institutional risk appetite over time
“One of the big advantages of having A total portfolio approach with the reference portfolio is you tend to have a more stable risk appetite through time, and it'll be transparent if risk is taken up or down.”
Gilmore: Reference portfolios improve pension management accountability
“With our proposed approach for the total portfolio, the board adopts a reference portfolio, and that corresponds to a particular amount of risk, but it's the management that is using its initiative to propose the portfolio and to invest the portfolio. The mana…”
Gilmore: A simple stock-bond mix closely tracks most complex pension portfolios
“You can take a simple combination of equities and bonds, and it will track the actual portfolio very closely. And that'll be the case for most pension funds.”
Gilmore: CalPERS compensates staff on total portfolio results, not asset classes
“Some years earlier, Marcy had changed the compensation structure so that everyone got rewarded on the basis of the whole portfolio, not their asset class.”
Gilmore: CalPERS recommended a 75/25 reference portfolio with 400bps active risk
“We've recommended a 75% equity, 25% bond portfolio. We've recommended an active risk range around 400 basis points.”
Gilmore: CalPERS will limit direct private investments and expand public market activity
“I don't anticipate that we will be particularly active direct privates apart from co-investment, but I expect that we will become more active in the public markets given the balance sheet management and our improved liquidity management.”
Gilmore: Total Portfolio Approach enables more concentrated asset class portfolios
“When you're thinking about its contribution to the whole portfolio, you should be much more comfortable in having a more concentrated asset class portfolio because it gets diversified away at the whole portfolio level.”
Gilmore: Scenario analysis should replace simple correlation in measuring diversification
“Rather than simply looking at historical correlations, one needs to be thinking about multi-dimensional scenarios and to think about how the portfolio behaves given those scenarios.”
Gilmore: CalPERS equity and fixed income teams generated strong unscaled information ratios
“The equity team, the fixed income team have been good at generating good information ratios, but it hasn't been scaled, which I found interesting because there have been constraints on the active risks that can be taken and sub-constraints.”
Gilmore: CalPERS must invest bulk of capital through larger managers
“The reality is that the bulk of capital is going to be invested through larger managers because of the size of our portfolio.”
Gilmore: NZ Super won via heavy bet sizing, not a high win rate
“If you look at all the different investment strategies, when I first looked at the analysis, I thought, well, actually the hit rate or the banning average is pretty ordinary. That's not that unusual, but the slugging average was amazing. The areas that it did …”
Gilmore: Smaller Teams Are Better Positioned to Adopt TPA
“It's probably smaller teams that are better positioned.”
Gilmore: Total Portfolio Approach Allocators Tend Toward Higher Private Market Exposure
“And if you look at the TPA adherence, they tend to have a bigger exposure to private markets.”
Gilmore: Non-US allocators will struggle to diversify away from US markets
“There's a desire to diversify away from the US. That's probably going to be Difficult because the other capital markets aren't as deep.”
Gilmore: National security concerns make government capital controls quite possible
“One thing that I wouldn't like to see would be forms of capital controls, but that's quite possible.”
Gilmore: Total portfolio approach captures hybrid investments that SAA buckets miss
“If you're sitting there with a strategic asset allocation, and you've got all these asset classes, it could be that you've got a hybrid, where does it sit? Or there could be something that's new, and you don't have a bucket for it. It's hard to do. With the to…”