Outsourced Chief Investment Officer, or OCIO, is when an asset owner “outsources” some or all portfolio-management decisions to a third-party investment partner.

The OCIO provider takes on fiduciary responsibility, and often ownership of certain operational services. However, importantly, the asset owner continues to retain full authority over asset allocation, as well as risk and return objectives.

Institutional investors that range from corporate pensions, public pensions, endowments, foundations, healthcare systems to family offices have relied on OCIO to address specific objectives and constraints.

While in the past OCIO was seen as a service sought by smaller entities, larger pools of money are increasingly turning to OCIO today.

Today’s investors may need expertise across a broader, more complex range of asset classes to generate the returns needed. This may mean leaning further into riskier asset classes like alternatives, which require more oversight, but also being nimble in portfolio changes to manage risk or take advantage of dislocations.

Then there’s the challenge of getting access to the right managers and markets. An OCIO provider with experience and scale can help clients gain entry into investments that may not have been accessible independently. By taking the whole portfolio into account, we seek to align the strategic asset allocation with the tactical, generate better access and fees, as well as more efficient trading.

Investing—constructing a well-diversified portfolio, setting the strategic asset allocation, minimizing volatility—is the heartbeat of OCIO. We help investors who are seeking the best investment managers across the globe.

Asset owners are also placing increasing value on the “O,” the outsourced services. This can involve managing stakeholders, handling regulatory requirements, and streamlining analytics and reporting. The complexity and time required for these tasks, as well as the technology and costs, have become more and more burdensome for institutions. Having a skilled partner can free up time and resources for clients.

One of the biggest benefits of having an OCIO partner is timeliness. Most asset owners don’t make investment decisions until they meet with their investment committees, trustees, and consultants—meetings that typically only occur quarterly.

These groups then often rely on stale data to adjust portfolios—a problem given today’s volatile and complex financial markets.

With OCIO partnerships, the delegated third-party firm monitors investments daily and has the authority to make necessary portfolio changes in real-time. This enhances clarity around the governance, making it clear which stakeholders are responsible for what.