Benefits of an OCIO Relationship
Partnering with a seasoned OCIO brings many benefits, including: enhanced performance potential, comprehensive portfolio management, a robust governance process, and back-office support.
The ultimate aim for fiduciaries is to achieve their return objective at the least cost and with the minimum amount of risk. An OCIO can help construct a cost-efficient portfolio that strives to strike an optimal balance between risk and return, and it can employ sophisticated analytical tools to properly align an investment strategy with an institution’s circumstances and core mission. Improving net-of-fee, risk-adjusted returns increases wealth over time and helps institutions satisfy the growing demands placed upon their investment portfolios.
An OCIO increases the efficiency and agility of decision-making, simplifies oversight, and helps appropriately focus the attention of each level of investment governance. By taking on the responsibility of the day-to-day management of the investment portfolio, the OCIO allows internal staff to focus on core operations, and governing bodies to focus on setting the institution’s strategic direction and ensuring the alignment of the investment policy with that direction. Governance is also enhanced by replacing the fragmented views provided under the traditional fiduciary governance model with the total perspective provided to fiduciaries by the OCIO.
Save Time and Cost
CIO outsourcing eliminates the need to recruit and retain a fully staffed internal investment office and to provide that office with the up-to-date systems required for policy design, risk management, back-office operations, and performance measurement. An OCIO also saves money for its clients by making its portfolio management process more efficient. These efficiencies include the ability to negotiate lower manager fees, eliminate fund-of-fund fees, and minimize costs associated with third-party providers, many of whom are rendered superfluous by the OCIO.
An OCIO provides to institutions the diverse resources and capabilities needed to manage complex investment portfolios.
- Asset allocation modeling
- Expertise in evaluating and managing the full range of asset classes and related investment strategies
- Capacity to implement complex investment strategies
- Rigorous risk management analytics
- Legal staff to negotiate and execute agreements with managers
- Robust systems to manage operations
- Back-office services (including accounting, cash-flow management, performance measurement, documentation, tax, and audit support)
- Experience in managing relationships with investment managers, actuaries, auditors, custodians, and other service providers
Achieve Broader Goals
An institutional investment portfolio exists to serve a broader mission. An outsourced CIO provides the analytical tools needed to quantify the impact of a range of potential investment outcomes on the institution’s financial well-being and ability to achieve its strategic objectives. With these tools, the outsourced CIO can rigorously assess the alignment of different investment strategies with a client’s mission.