There has been rapid and substantial growth in the adoption of outsourced CIO services over the last several years. This growth has arisen from both an increasing embrace of that approach by institutional investors, and the number of investment advisory firms that have extended their practice to take on the implementation and fiduciary duties that are part of the OCIO profile.
“Pensions & Investments' data show total worldwide OCIO assets among firms in its database reached $1.69 trillion as of March 31, up 11.2% from a year earlier. Total U.S. client outsourced assets, meanwhile, reached $1.15 trillion during the period, a 13% increase.”
1Pension & Investments, Complex portfolios spur increased use of outsourced CIOs, James Comtois, June 26, 2017
However, delivering OCIO services requires specialist technology and operational enablement well beyond that required for a firm’s investment advisory practice. The success of an OCIO will depend on having capability that supports both advanced investment solutions and enables the firm to control operational risk and cost. Doing so will increase the firm's competitive advantage while bending the cost curve to deliver greater value to both clients and shareholders.
“The growth of the outsourcing market stems from increasingly complex and volatile capital markets, regulatory changes, resource constraints, and demand for improved governance,” Cerulli explains. “As a result, institutions seek timelier decision-making, deeper manager due diligence, and greater oversight of portfolio risks.”
According to Cerulli Associates, the vast majority (85%) of OCIO providers surveyed expect significant new business opportunities from institutions looking to move from an advice-only advisory relationship to a more discretionary OCIO solution.
2Planadvisor, Larger Institutional Clients Embracing OCIO Service, John Manganaro, November 17, 2016
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