Looking beyond asset class labels

Total portfolio approaches evolving from traditional strategic asset allocation models

We’ve long argued this is a world where mega forces like AI transforming markets could imply different long-term outcomes. Why? Macro anchors investors have relied upon – like stable inflation expectations – are lost, meaning structural calls need more frequent updating. Growing interest in total portfolio approaches (TPA) reflects a desire for a new portfolio construction framework. This fits with our evolving whole portfolio research and implementation of the past decade.

The recent attention on TPA reflects growing appetite among institutional investors to fundamentally rethink strategic horizon portfolio construction. Yet beyond this, there is no broadly accepted agreement on what TPA entails. While its meaning varies among different practitioners, TPA points to common aspects of how traditional strategic asset allocation (SAA) should evolve, like setting client-specific objectives in the context of the whole portfolio.

We’re seeing this play out now as mega forces shape markets, highlighting how taking thematic exposures in portfolios requires a lens that transcends asset classes: The share of the information technology sector in the MSCI U.S. and MSCI emerging market (EM) indexes has roughly doubled since the launch of ChatGPT in 2022 – and more than doubled in investment-grade bond issuance since then (see chart below).

Rising interest in TPA can also be viewed as a symptom of this new investment environment. Simply put – solving for a static SAA over many years is inconsistent with today’s world – and investor experience of this in their portfolios leads directly to the desire to search for a new approach to portfolio construction.

Our strategic-horizon portfolio construction work, developed over the past decade, is designed to address many of these objectives while adding the detail, definition, and governance needed for implementation. See here how we define our portfolio construction framework.

A more active approach

Zooming out, we think this means investors should revisit big portfolio calls more often and have an explicit plan B portfolio ready. It also calls for a common whole portfolio lens that shifts the unit of analysis to the underlying economic and factor drivers of return and risk, plus a more holistic approach to risk budgeting between alpha and beta.

This approach was a touchpoint at our Midyear Forum earlier this month. Some of our credit investors mentioned how they focus on underlying exposures as opposed to asset class labels, while fixed-income macro investors unpacked how our micro is macro theme from our 2026 Global Outlook is informing decisions. Elsewhere, equity investors noted that geography is no longer a major input for investment decisions: What matters more is what a company actually does and the drivers of its revenue, not the country where its stock happens to be listed.

The key: Portfolio decisions shouldn’t be driven by asset class labels. Adopting a scenario-based approach should be done carefully and with a clear framework as to how governance needs to evolve with it, as investors often cite an improved governance process as one potential benefit but can struggle to implement it in practice. This includes internally consistent risk and return assumptions across private and public assets; a plan for blending alpha, factor and index returns; a scenario approach; and systematic ways of dealing with economic uncertainty.

These frameworks maximize flexibility while allowing fund governance to hold decision-making to account. Clear decision-making processes are also essential to make tradeoffs comparable across the whole portfolio. What’s key: The portfolio construction process, not the labels given to it.

Our bottom line

All asset allocation decisions are active calls in today’s investment environment. This requires portfolios to be built around exposures and convictions – and looking beyond asset class labels.

Jean Boivin is Managing Director, Head of the BlackRock Investment Institute at BlackRock Inc.

Wei Li, Managing Director and Global Chief Investment Strategist at BlackRock Investment Institute, Vivek Paul, Global Head of Portfolio Research – BlackRock Investment Institute, and Devan Nathwani, Portfolio Strategist – BlackRock Investment Institute, contributed to this article.

Disclaimer

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© 2026 BlackRock Inc. All rights reserved. iSHARES and BLACKROCK are registered trademarks of BlackRock, Inc., or its subsidiaries in the United States and elsewhere. This article first appeared June 8, 2026, on the BlackRock website. Used with permission.

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