Why NYC pensions CIO hasn’t drunk the ‘TPA Kool-Aid’

While the total portfolio approach is enjoying stratospheric popularity with asset owners, Monte Tarbox, the new chief investment officer of the $306 billion NYC Bureau of Asset Management, says it’s not the right way for many US public pension plans to invest and he won’t be adopting it anytime soon.

“I think that there’s a lot that we can do to try to break down silos and improve collaboration. But I haven’t drunk the TPA Kool-Aid, if you will,” he tells Top1000funds.com in a wide-ranging interview.

While Tarbox is keen on reducing organisational silos, he doesn’t believe employing a total portfolio approach is the way to get there. Funds that practice TPA often cite less focus on asset class targets and more on total fund outcomes as an investment edge the approach brings.

“TPA has a lot of merits, it’s well-intentioned, but operationally I think that most of our organisations – and by we I mean pension funds here [in the US] – are not really engineered, structured, or governed in a way that really could realise the full potential of the TPA approach.”

Specifically, Tarbox says most US public pension funds are not set up to trade frequently and make tactical bets with market fluctuations. “We don’t have, in most cases, the strategic depth to execute on that,” he says. What they are set up to do, however, is taking long-term market views and allocating accordingly.

“The other thing that strikes me about TPA is that the investment staff of public employee pension plans in the United States have always wanted more discretion for themselves. They’ve always wanted more ability to make investment decisions and play the game like the big boys on Wall Street,” he says.

“That’s been around for a long time, and concomitantly they always would prefer wider guidelines or looser guidelines to maximise their discretion.

“I’m not sure if that’s really going to translate into better portfolio outcomes, or if this just makes the job for investment staff at a public fund more fun, more sexy, more interesting. And at the end of the day, what really matters is governance.”

Infrastructure lores

When Australian superannuation funds-backed IFM Investors began exporting their infrastructure investment model to the US in the 1990s, Monte Tarbox was the first person they hired on the ground. He helped establish the New York office, raised the first $600 million and spent years making the case to American pension trustees that infrastructure deserves a place in their portfolio.

The effort was slow going at first. But Tarbox’s pitch to sceptical pension boards was that “if you like real estate, you’re going to like infrastructure”, tapping into trustees’ preference for brick-and-mortar assets and resilience to economic cycles.

Decades later, infrastructure investment is now a priority for Tarbox at NYC BAM.

It currently has 3.36 per cent allocated to infrastructure, primarily in infrastructure equity, but Tarbox would like the team to explore the debt side, calling it “a new frontier”.

“In almost every asset class, our investment opportunities divide somewhat neatly between equity and debt. In the public markets, we’ve got stocks and bonds. In real estate, we have development deals in equity real estate, versus mezz debt and subordinated lending. They’re a natural combination,” he says.

In 2022, NYC BAM received the legislative approval to lift the upper limit of its private market investments from 25 per cent of the total fund to 35 per cent, which provided room for the fund to increase the current combined allocation in private equity (9.22 per cent), real estate (6.55 per cent), opportunistic fixed income (5.32 per cent), infrastructure (3.36 per cent) and hedge funds (1.47 per cent).

Tarbox considers infrastructure as an opportunity not only for NYC BAM but also for the broader US public pension industry.

“The key thing is that real estate and infrastructure each march to the beat of a slightly different economic drummer. They’re not highly correlated so more infrastructure adds better diversification,” he says.

“The day is coming – and I would welcome it – when infrastructure has an equal weighting [to real estate] in most US pension fund portfolios. I’d like to see us drive that forward now.”

Nervous about PE

However, Tarbox has concerns about private equity and specifically the continuous exit pressure. He says investors should be concerned about whether the fundamental model of GPs creating value in portfolio companies, and hence profit for LP capital, is under threat.

“Private equity firms are having a very hard time finding profitable exits, and I don’t think that’s just a cyclical or transient problem. It may reflect something deeper about the structural constraints in private equity, and as investors we have to take that a lot more seriously,” he says.

While Tarbox is “not thrilled” with creative structures like continuation vehicles, which GPs have been using to return capital to LPs, he is even more “nervous” about the emerging cross-pollination between private credit and private equity funds.

“We’re starting to see private credit funds step up to provide lending to some of those private equity funds that haven’t been successful at realising their gains. Basically [through] dividend recapitalisations, they’re loaning money to private equity funds to pay us, the LPs, back,” he explains.

“But in doing so they’re just adding leverage on top of their existing holdings, and it doesn’t seem to get the private equity funds any closer to a [profit] realisation, and in some cases we’re on both sides of that trade.

“We’re lending money to private credit firms, that are lending it to private equity firms, who are using that to lever up the holdings they have to send money back to us, and that circularity gives me the willies.”

The prevalence of AI and data centre opportunities across private markets investment is also becoming a red flag as Tarbox recalls the theme is omnipresent across almost every real asset and PE proposal from GPs. While acknowledging that the sector is capital intensive and has growing demand, investors might not know “how much is enough and when is too much”, he says.

“I’m pushing our staff and our investment partners to be a little bit more circumspect about this mad dash – let’s call it a gold rush – into data centres, because I feel like I’ve seen this movie before in the years of 1998, 1999 and 2000 when there was a huge dot-com boom,” Tarbox says.

“I’m encouraging everybody on our end to take seriously the counter argument, take seriously the counterfactual, and try to at least have some kind of view about when we might reach enough, and when would be too much.”

Organisational improvements

Tarbox arrived at NYC BAM during a period of change. The veteran investor was pulled out of retirement in Chicago to become the interim CIO of NYC BAM in January, after getting a call from then-NYC Comptroller Brad Lander’s office.

NYC BAM invests on behalf of the city’s five public pension funds. In December 2025, Lander was preparing to hand over the Comptroller role and leadership of the five trustee boards to Mark Levine, a seasoned public official but one without prior pension management experience. The change coincided with the departure of then BAM CIO Steven Meiers for a senior client role at Neuberger Berman. 

Lander was looking for someone to steer the ship on a temporary basis, ideally someone retired so that they wouldn’t need to be poached from their existing employer and less concerned about advancing their career. Tarbox ticked the boxes and was happy to pick up the gig.

“I’ll be honest, I didn’t have big aspirations or ambitions about making substantive changes, because I didn’t think that was my mandate,” Tarbox says.

“My main concern was to, as I like to say, keep the trains running on time. I did not want the staff to feel like they had to pause in their work on underwriting new investment, or in any of the searches underway, or any of the rebalancing needed just to wait and see.

“I told them, ‘If in doubt, just go forward with whatever you think is right, and I’ll play catch-up ’.”

But the Comptroller’s staff kept up the “charm offensive” which swayed Tarbox into staying around longer, and he also realised there were areas of investment practices at BAM where he could genuinely help improve over the long term. Tarbox became BAM’s permanent CIO two months after joining the organisation.

For one, Tarbox wanted to push for better adherence to the investment policies around diversity, inclusion and climate targets. Both Lander and Levine had been outspoken on climate and corporate governance issues and NYC BAM is currently re-tendering billions in a passive equity mandate, following the failure of the incumbent to meet its climate expectations.

“The Comptroller’s office had a number of policies in effect that, with all due respect to my predecessor and the past administration, weren’t being as effectively honoured [internally],” Tarbox says.

“I got the distinct impression that the investment staff had been given a bit of a pass on aligning their investment recommendations with those policies, and so one of my first steps was to make clear that these policies matter.

“They’re actually not in conflict in any way with our investment objectives, and in most cases – actually in all cases – they had been codified by decisions of the trustees of the five pension fund boards.”

Secondly, as with any big organisation, Tarbox has been focusing on reducing silos within the investment department. He sees a bigger opportunity for different teams to work together especially across asset classes when the boundaries are “fuzzy” such as real estate and infrastructure, or infrastructure and private equity.

“I want to see more collaboration and people taking advantage of their colleagues’ expertise in more ways, so that’s a high priority.”

One challenging part of the job will be the complexity of BAM’s governance structure, which will see Tarbox report into 77 trustees across five separate boards. He believes BAM can improve the way it communicates with the boards.

“I got the distinct impression that the trustees of the five funds, were not completely confident about the recommendations they were getting from the Bureau of Asset Management,” he says.

“It’s not that they have doubts, they just need a little bit more reassurance that what we’re doing is aligned with what they want.

“We can be more nuanced, subtle and sophisticated in how we communicate with them, but most of all demonstrate to the trustees that we know who makes the final decisions and we respect that.”