Functional Allocation Framework

Meketa

Colin Bebee

Research

18 Pages

Meketa outlines a portfolio design that groups assets by what they do rather than by traditional labels. The paper explains how functional buckets can sharpen governance, improve risk oversight, and give implementation teams more flexibility without changing core optimization mechanics. It also contrasts functional frameworks with factor investing, risk parity, and hybrid structures.

Key Takeaways

Improved governance: Functional buckets clarify risks and separate board policy from staff implementation.
Role based grouping: Assets map to growth, diversification, or inflation protection based on portfolio function.
Transparency over alpha: Framework targets clarity and risk control, not excess return, while keeping modeling similar.
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