The Benefits of the “Outsourced Chief Investment Officer” Model
What sets them apart and how plan sponsors determine if it’s the right strategy
Discretionary investment consulting, or the “Outsourced Chief Investment Officer” (OCIO) model, has generated considerable interest over the last several years among institutional and family investors alike. Many have attributed the growth in OCIO assets, which have more than doubled since 2010, to the perception that outsourcing investment decisions to an advisor will generate higher returns.
While in some cases this may be true, the OCIO model may provide benefits to plan sponsors that transcend the potential for improved investment returns, according to Segal Marco Advisors.
“The OCIO model can provide unique benefits in managing an investment portfolio, such as timely investment decision-making and implementation, platform scalability, customized products and solutions, and fee and cost savings,” said T.J. Kistner, Director for Segal Marco Advisors in Chicago
There are several areas of investment where a well-managed OCIO program may lead to improved risk-adjusted performance over the long term, including:
- Increased Investment Flexibility and Timely Decision Making — A discretionary manager should have the governance structure and processes in place to quickly and effectively implement investment ideas and engage investment managers.
- Enhanced Governance Structure — “Utilizing the OCIO model can provide the governance and committee structure needed to ensure the portfolio is being managed and monitored frequently, as opposed to the typical meeting cycles of a board of trustees, investment committee or other governing body,” noted Kistner.
- Fee and Cost Savings Through Scale — The pooling of capital offered by an OCIO platform can result in fee savings and provide enhanced manager and asset class diversification to asset owners’ portfolios.
- Managing Complexities of an Investment Program —“There are countless complexities in managing a successful investment program,” added Kistner. “The sheer number of investment managers and strategies available to asset owners presents the challenge of identifying best-in-class investment ideas. An OCIO can relieve asset owners of some of these complexities by providing the decision-making framework and operational discipline necessary for managing a successful investment portfolio.”
To speak with a consultant about how an OCIO model can help plans stay ahead in today’s rapidly changing investment landscape, please contact Todd Kohlhepp.
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Segal Marco Advisors, a member of Segal, provides trusted advice that improves lives. Segal Marco delivers innovative, client-driven investment consulting advice, outsourcing solutions, proxy voting and corporate governance services. Clients include joint boards of trustees administering benefit plans under the Taft-Hartley Act, state and local governments, corporations, non-profit organizations, endowments and foundations. The firm works with financial services firms through Rogerscasey, a Division of Segal Advisors, and with Canadian clients through Segal Rogerscasey Canada.