What Do Investment Outsourcing and Ice Cream Have in Common?

Executive summary:

  • For some organizations, a partial outsourcing of their investment program is preferable to total outsourcing. Despite this, some OCIO providers will still try very hard to sell companies on a full OCIO solution.
  • The best OCIO providers understand that OCIO is not a one-size-fits-all solution, and will offer customized solutions that align with an organization’s wishes.
  • We believe there can be significant benefits to working with an OCIO provider that can handle more than one function. These include a consolidation of accountability and time savings.

What do investment outsourcing and ice cream have in common?

Answer: They both come in many flavors.

As anyone who’s ever enjoyed a chocolate-vanilla swirl cone can attest to, sometimes the best outcome originates from a combination of things. I’d argue that the same holds true for many folks’ notions of OCIO (outsourced chief investment officer). In some instances, the optimal solution for an organization isn’t black or white. Or chocolate or vanilla. It isn’t just full OCIO or limited to consulting. Rather, it’s a mix of services. Call it the swirl-cone approach.

This is because the reasons why an organization may choose to partially outsource are many. Some asset owners literally need a full array of services from asset/liability modeling through answering auditor questions. But others only need a specific type of risk management assistance or help with maintaining their desired asset allocation. Maybe the asset owner just wants to slot in a private-markets solution on a turnkey basis. Perhaps the resources and bandwidth exist to keep some investment functions in-house, but the organization is looking externally to leverage additional resources in order to expand into a new asset class or strategy. Or maybe an internal CIO is intrigued to test the waters of OCIO by handing over one assignment at a time, rather than everything in one fell swoop. Whether it’s a traditional notion of total outsourcing that the industry often associates with OCIO or a more selective harnessing of external resources to leverage limited internal staff, the ability to customize the mix of services with the asset owner’s needs is key.

I firmly believe the best OCIO providers can meet clients where they are—to deliver customized, tailored solutions that align with an organization’s wishes. The problem is that not all providers offer that flexibility. For some, only an all-or-nothing approach works. That is, they offer an off-the-shelf product called OCIO rather than a menu of services that can be structured to fit hand-in-glove with the asset owner’s needs.