Institutional investors face an array of challenges in managing their investment programs. Volatile capital markets, evolving investment strategies, growing operational complexities and generally leaner staff than in years past are all hallmarks of today’s environment. Organizations are seeking ways to effectively govern and implement their investment programs in light of these considerations.
For institutional investors, engaging an outsourced chief investment officer, or OCIO, is one of the most critical decisions an organization can make. Choosing the right partner can lead to achieving the desired results or unexpected consequences. What drives an organization to hire an OCIO? What should be considered when selecting a partner? Is there a framework to aid in the decision-making process?
At Aon, we partner with our clients to help them make better decisions with clarity and confidence. We firmly believe that the relationships with investment consultants have driven the growth of the OCIO model and that choosing an OCIO that has grown from investment consulting DNA will help drive the desired results your organization seeks to achieve.
What is an OCIO?
At the most basic level, an OCIO relationship can be described as engaging experts to implement a portfolio strategy. An OCIO is a resource for organizations that take on accountability and fiduciary responsibility for implementing the investment policy of an asset pool by selecting outside managers and ensuring compliance with investment policy parameters, such as asset allocation targets and ranges. Whereas in a traditional investment consulting relationship, the consultant recommends managers, an OCIO selects them and handles other aspects of implementation such as contracting, transition and portfolio rebalancing. An OCIO also manages liquidity and trading costs and shares the appropriate level of fiduciary responsibility with the client’s internal governance committee. Given the increased complexity of institutional investment programs, an OCIO can help investors access the expertise, innovation and scale they need to get the most out of their investment strategy.