Understanding Different Types of OCIOs: Structures, Philosophies, and Fees

Understanding Different Types of OCIOs: Structures, Philosophies, and Fees
September 3, 2025 8 mins

Understanding Different Types of OCIOs: Structures, Philosophies, and Fees

Understanding Different Types of OCIOs: Structures, Philosophies, and Fees

As institutional investors face increasing complexity in managing their portfolios, many are turning to Outsourced Chief Investment Officer (OCIO) solutions. But not all OCIOs are created equal.

Key Takeaways
  1. The OCIO model offers a powerful solution for asset owners seeking professional management, improved governance, and access to sophisticated investment strategies.
  2. Organizations considering hiring an OCIO should be familiar with the different types of OCIOs.
  3. Key considerations are whether your OCIO should be a consultant or asset manager, and whether they use open architecture or a proprietary platform.

The opinions referenced are as of the date of publication and are subject to change due to changes in the market or economic conditions and may not necessarily come to pass. Information contained herein is for informational purposes only and should not be considered investment advice.

The OCIO landscape is diverse and nuanced: from consultants to asset managers, open architecture to proprietary platforms, and separate line-item fees to pricing that bundles OCIO as asset management fees.

This article explores the key types of OCIO providers, their investment philosophies, and the fee structures that define their services—helping asset owners make informed decisions about which model best fits their needs.

1. The Two Primary OCIO Provider Types

Consultant-Based OCIOs
Consulting firms that have evolved into OCIO providers typically emphasize independence, open architecture, and fiduciary alignment. These firms often began as traditional investment consultants and expanded into discretionary management to meet client demand for more agile and accountable investment execution.

Consultant-based OCIOs, such as Aon, generally select third-party managers based on merit and fit. These open architecture OCIOs offer clients access to a broad universe of investment managers, regardless of affiliation. This model is designed to minimize conflicts of interest, maximize flexibility and objectivity, and ensure that manager selection is driven by client needs, rather than internal product promotion.

Asset Manager-Based OCIOs
In contrast, asset managers that offer OCIO services often integrate their own investment products into client portfolios. These firms may offer economies of scale and deep expertise in some asset classes, but their use of proprietary funds can raise concerns about objectivity.

While some asset manager OCIOs offer access to third-party managers, the degree of openness varies. Asset owners should carefully evaluate whether the provider’s incentives align with their own investment goals.

2. Fee Models: What Are You Really Paying For?

A. Separate Fees
Many OCIOs charge a fee that is separate from the investment managers, as a flat fee or based on assets under management (AUM). This model is transparent and easy to understand. Some OCIOs include services like custody, performance reporting, and operational due diligence into the AUM fee, while others charge separately.

B. Bundling OCIO and Asset Manager Fees
Some OCIOs bundle their fees for OCIO services in with the fees for asset management—this can occur for both consultant-based and asset-manager-based OCIOs. This model provides predictability of total fees, but lacks transparency about how much the client is paying for OCIO services. Further, it provides incentives for the OCIO to use lower cost investment products, even if they are not in the best for the client, because savings accrue directly to the OCIO’s bottom line, not the client.

C. Hidden or Embedded Fees
Clients should be wary of embedded fees, especially in proprietary fund structures. These can include fund-of-funds layers, revenue-sharing arrangements, or markups on underlying manager fees. Transparent OCIOs disclose all layers of fees and provide full visibility into the cost of implementation.

The exhibit below shows a simple example of how one might compare the fees across different models, which can highlight that (1) the asset management fees may be different in an OCIO model because of the scale the OCIO brings, and (2) an OCIO with unbundled fees will have greater transparency than one with bundled fees.

Fees Advisory Model OCIO Model: Unbundled Fees OCIO Model: Bundled Fees
Investment Management Fees
(Current Asset Allocation)		 $000,000 (00 bps) $000,000 (00 bps)


$000,000 (00 bps)
Investment Consulting Fees $000,000 (00 bps) $000,000 (00 bps)
Total $000,000 (00 bps) $000,000 (00 bps) $000,000 (00 bps)

3. Small vs. Large OCIO Firms: Scale, Service, and Specialization

Large OCIO Firms
Large OCIO providers typically manage hundreds of billions in assets and serve a wide range of clients across sectors. Their scale allows them to:

  • Negotiate lower fees with investment managers and custodians, in many cases passing on savings to clients.
  • Access exclusive investment opportunities, including capacity-constrained hedge funds or private equity deals.
  • Invest in technology and infrastructure, offering robust risk analytics, performance reporting, and compliance tools.
  • Provide global reach and deep research capabilities, with dedicated teams for asset classes, geographies, and operational due diligence.

Some asset owners may believe that large OCIOs offer less personalized service. However, clearly most large OCIOs must be providing good service, as they can only become large by winning and retaining many clients.

Small and Mid-Sized OCIO Firms
Many boutique firms offer OCIO services. While smaller firms may lack the scale and breadth of resources of their larger counterparts, they may have a specialty focus where they are particularly skilled in certain niche areas. These firms may be a better fit for:

  • Organizations that prefer a small team overseeing their whole portfolio.
  • Organizations gravitating toward working with a single person, in essence selecting the person rather than the firm.

4. Customization and Flexibility

Full Delegation
In a fully delegated model, the OCIO assumes responsibility for most investment decisions, including manager selection, rebalancing, and contracting. Asset owners typically retain control over strategic decisions in the investment policy—such as strategic asset allocation—while delegating implementation to the OCIO. This model is ideal for organizations with limited internal resources or those seeking to streamline governance.

Partial Delegation (Hybrid)
Some asset owners clients retain control over much of their investment program, but delegate implementation to an OCIO for specific pieces where they believe they need more help, such as customized liability-driven investing (LDI) solutions, impact investing, or niche strategies like private credit. This can also be a launching point for the organizations to explore if they want to move to full OCIO prior actually making the change.

5. Choosing the Right OCIO: Key Questions to Ask

When evaluating OCIO providers, asset owners should ask:

  • Is the OCIO a consultant or asset manager?
  • Does the platform use open architecture or proprietary funds?
  • How are fees structured? Are there any hidden costs or revenue sharing with the underlying asset managers?
  • What services are included in the base fee?
  • How does the OCIO handle manager selection and due diligence?
  • What operational infrastructure supports implementation?
  • How flexible is the governance model?
  • How large is the OCIO, and does it have depth in all the areas needed for the mandate?
  • What is the OCIO’s track record with similar clients?

Conclusion

The OCIO model offers a powerful solution for asset owners seeking professional management, improved governance, and access to sophisticated investment strategies. But the right OCIO partner depends on your organization’s goals, resources, and risk tolerance. By understanding the differences between consultant and asset manager OCIOs, open architecture and proprietary platforms, various fee models, and firm size, you can make a more informed decision—and build a partnership that drives long-term success.

Contact Us

Bryan Ward, CFA
Head of U.S. Investments
Aon Investments USA Inc. North America
[email protected]

General Disclaimer

Investment advice and consulting services provided by Aon Investments USA Inc. (“Aon Investments”). The information contained herein is given as of the date hereof and does not purport to give information as of any other date. The delivery at any time shall not, under any circumstances, create any implication that there has been a change in the information set forth herein since the date hereof or any obligation to update or provide amendments hereto. This document is not intended to provide, and shall not be relied upon for, accounting, legal or tax advice. Any accounting, legal, or taxation position described in this presentation is a general statement and shall only be used as a guide. It does not constitute accounting, legal, and tax advice and is based on Aon Investments’ understanding of current laws and interpretation. Aon Investments disclaims any legal liability to any person or organization for loss or damage caused by or resulting from any reliance placed on that content. Aon Investments reserves all rights to the content of this document. No part of this document may be reproduced, stored, or transmitted by any means without the express written consent of Aon Investments. Aon Investments USA Inc. is a federally registered investment advisor with the U.S. Securities and Exchange Commission. Aon Investments USA Inc. is also registered with the Commodity Futures Trading Commission as a commodity pool operator and a commodity trading advisor and is a member of the National Futures Association. The Aon Investments USA Inc. ADV Form Part 2A disclosure statement is available upon written request to: Aon Investments USA Inc. 200 E. Randolph Street, Suite 600 Chicago, IL 60601 ATTN: Aon Investments Compliance Officer

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