The Value of Working With an OCIO Provider That Can Do It All

Executive summary:

  • We believe that an OCIO provider should have the capability to handle any type of investment assignment. However, most OCIO providers do not have the ability to do this.
  • Regardless of whether an investor needs full, holistic outsourcing or just a partial set of services, we believe their best choice is to work with a best-in-class OCIO operation that performs all of the necessary functions.
  • From our vantage point, working with a specialist that is part of a firm with a broad set of capabilities makes it more likely that the specialist will add value beyond their mandate—by helping a CIO manage how that mandate integrates with the balance of their investment program.

The importance of finding an OCIO provider who does it all. Even if you’re partially outsourcing.

Some do some. Few do all.

For institutional investors, a large part of a CIO's job description is marshalling a virtual org chart. A CIO’s team likely includes money managers, trustees, custodians, risk management specialists, portfolio performance specialists, trading desks, overlay services, asset liability modeling pros and more. It’s a lot to handle. Which leads me to this question: If all those capabilities are the responsibility of a CIO, then shouldn’t they all be the responsibility of outsourced CIO?

They should. An OCIO provider should have the capability of handling all those tasks—the complete job description. But most cannot. Most OCIO providers are forced to tell their clients that they, the provider, can manage some—or perhaps even most—of those tasks, but the client will still have to manage some parts on their own. So, in reality, what they call OCIO—outsourced CIO—is really just partial outsourcing. And really just a partial solution.

How a successful CIO operates

As a former CIO of one of the larger corporate asset owners in North America, I know how the process works successfully in the real world. If I needed emerging markets exposure in my portfolio, I needed to find the best emerging markets manager for that job. If I had a risk management problem that required solving, then I had to find the risk management capability to solve that problem and bring it online. If a portfolio transition was required, I needed to ensure I had the right transition management services lined up. If I needed to equitize cash, I had to bring overlay services to play.