Charles Skorina & Company
● RETAINED EXECUTIVE SEARCH ●
Our Clients: Boards, Asset & Wealth Managers, Family Offices
We recruit CEOs and CIOs, advise on performance and pay, M&A consulting
LATEST NEWSLETTER
Our latest Outsourced Chief Investment Officer report features a list of 103 OCIO firms, each with updated contact information and AUM numbers. It’s the most comprehensive and accurate available.
For the nine months ending December 31st, 2021, the managers on our list added $381 billion (an 11.64% gain) in AUM, totaling a record $3.658 trillion dollars in discretionary outsourced assets.
But after years of steady growth, it’s apparent there’s a shakeout underway.
As we noted in our February 2021 OCIO update, discretionary asset managers without products to sell are notoriously hard to scale. Brilliant, original strategies lose their potency when they are widely copycatted. Or, a strategy works in one season, in one kind of market, but not in another.
That’s why so many OCIOs and RIAs now have private equity partners or reside within much larger financial or consulting organizations.
As Jon Hirtle, executive chairman of OCIO provider Hirtle Callaghan, remarked to Alicia McElhaney in a recent Institutional Investor article, “In business school, they teach you there’s a group of pioneers. If it works, there’s a flurry of copycat activity. And then there’s a shakeout and a consolidation.”
From our vantagepoint, it looks like the industry is entering the consolidation phase.
Wealth management M&A activity reached an all-time high in 2021, with an announced 307 transactions according to Echelon Partners’ 2021 RIA M&A Deal Report.
Over the last sixteen months, CapTrust acquired Ellwood Associates, iM Global Partners bought Litman Gregory, New Providence joined The Colony Group, Focus Financial bought CornerStone, and US Bank swallowed PFM – five firms on our last OCIO list.
And from what we hear there is plenty of dry powder and amenable prospects waiting in the wings.
Barron’s reported last November that “KKR is taking a stake in Beacon Pointe Advisors, the largest female-led RIA, in a deal that values the acquisitive firm at over $1 billion.” This after KKR invested in and then exited from Focus Financial, another RIA and OCIO aggregator.
Given this merger merry-go-round, we took our cue from Institutional Investor and spoke with Mr. Hirtle, “a pioneer in the outsourced chief investment officer business,” as Ms. McElhaney put it.
What did he think about the buy-out mania? Is the independent OCIO model still viable? And if so, how does one keep the “barbarians” at bay?
We include our conversation with Mr. Hirtle below.
What about the elephant?
Our data suggests that demand for outsourced investment services will continue to grow at a healthy rate, but that new entrants face formidable odds.
Why? Because there’s an elephant in the room. Concentration. A handful of managers control the bulk of the money.
Just eight providers – Aon, Blackrock, Goldman Sachs, Mercer, Russell, SEI, State Street, and Willis Towers Watson – manage well over half the OCIO assets, $2.073 trillion of the $3.658 trillion AUM.
That’s fifty-seven percent of the outsourced pie. And they kept a tight hold on their market share in our latest reporting period, securing fifty-five percent or $211 billion of the $381 billion gain.
Big Eight ranked by AUM Size
Read More »NEWS AND COMMENTARY
ABOUT
Angela Miller-May, new CIO at Illinois Municipal Retirement Fund (IMRF)
11yrs Chicago Teachers’ Pension, 13 yrs Fiserv, MBA, DePaul, BA Northwestern
Matthew Mendelsohn, Yale’s new CIO
Lisa Howie, new CIO at Smith College
12yrs Yale investment office, AB, molecular biophysics Yale ’00 & MBA Yale ’08
Amy Falls, moves to Northwestern University as CIO
x CIO Rockefeller U, x CIO Phillips Academy, x MD Morgan Stanley, MPP Harvard, BA, Georgetown
SKORINA IN THE NEWS
9-2-21 Forbes: Insiders say Yale missed an opportunity to add diversity to its iconic $31bn endowment.
9-1-21 Institutional Investor: How to Reach the Allocator C-Suite.
5-7-21 BloombergNews: Yale Names Alex Banker Interim Endowment Chief, Plans Search
5-6-21 The New York Times: David Swensen, Who Revolutionized Endowment Investing, Dies at 67
5-6-21 Forbes: Yale Endowment Chief David Swensen Leaves Legacy of Top College Investment Leaders
CHARLES A. SKORINA & COMPANY works with leaders of Endowments, Foundations, and Institutional Asset Managers to recruit Board Members, Executives Officers, Chief Investment Officers and Fund Managers.
Mr. Skorina also publishes THE SKORINA LETTER, a widely-read professional publication providing news, research and analysis on institutional asset managers and tax-exempt funds.
Our Practice:
• We recruit Board Members and Executive Officers, Chief Investment Officers and Senior Asset Managers.
• Our research and analytics are backed by over thirty years of hands-on recruiting experience and an unrivaled personal network.
• We collect performance, compensation, and background data on most senior institutional investment professionals in the U.S. and the funds they manage. We analyze that data to construct profiles of those managers and their funds, identify best-in-class people, and map their career trajectories.
• We share our research and insights in a widely-read professional newsletter – THE SKORINA LETTER – and website – www.charlesskorina.com.
• The New York Times, Wall Street Journal, Bloomberg, Thompson Reuters, Financial Times (Fundfire), Institutional Investor, Pensions & Investments, Private Equity International, and the institutional investment community use our research and analysis. Skorina has been interviewed on chief investment officer compensation issues on Bloomberg TV.
• Our work is regularly re-printed in Allaboutalpha.com and other industry magazines, blogs, and third- party web postings.
• We focus specifically and effectively on the world we know: Board members and Executive Officers, Chief Investment Officers, and Senior Asset Managers at institutional investment firms and funds – including sovereign wealth funds, endowments, foundations, pension funds, banks, investment banks, outsourced chief investment officer firms (OCIO), and sell-side money managers.
Prior to founding CASCo, Mr. Skorina worked for JP MorganChase in New York City and Chicago and for Ernst & Young in Washington, D.C.
Mr. Skorina graduated from Culver Academies, attended Michigan State University and The Middlebury Institute of International Studies at Monterey where he graduated with a BA, and earned a MBA in Finance from the University of Chicago. He served in the US Army as a Russian Linguist stationed in Japan.
Charles A. Skorina & Co. is based in Tucson, Arizona.
The Family Investment Office: Defending the Legacy
Why build a family investment office? Because, as one chief investment officer at a large family office told me recently, “bad stuff happens.”
He mentioned that when the head of the family and business founder was thinking about hiring internal investment talent, the founder asked other family leaders he knew why they had hired a CIO.
They all said that having investment expertise inhouse and a portion of the assets in a diversified portfolio separate from the main business helped them when the unexpected struck.
In the last twenty-five years we’ve weathered a slew of financial storms including the 1997 Asian financial crisis, the 1998 Russian collapse, the 2000 Dot-com bubble, the Twin Tower attacks, and the 2007–2008 and February 2020 crashes. Remember those? And for the last two years Covid. And now there’s the appalling Russian assault on Ukraine.
And yet, in every crisis there’s opportunity. In 2020, according to the Credit Suisse 2021 Global Wealth Report, total wealth in North America rose by US 12.4 trillion. And probably more in 2021.
Looking at the ultra-high-net-worth segment, Boston Consulting Group counts 20,600 UHNW individuals in the US with personal wealth over $100 million, totaling about $5.8 trillion in investable assets.
Meanwhile, depending on the source, the number of US family investment offices grew from 3,000 to well over 5,000 during the last decade.
Personally, we have received more family office chief investment officer inquiries in the last two years than we’ve had in the ten prior.
Why?
Don’t Lose the Money
Building a legacy is different than preserving it. Founders who are good at wealth-creation usually have little experience with wealth-maintenance, where capital preservation is paramount and diversification is key.
Wealth is created by entrepreneurs, but maintained through diversification, sophisticated risk-management, and prudence. The psychological profile of the former does not easily transform to the latter.
Long-term investing, looking a generation or more ahead, demands a strategic mindset and patience in the face of market volatility. As a profit center, performance and volatility are always a concern.
Focus and Cohesion
A family investment office encourages consensus. If the objective is to preserve the family legacy, there needs to be focus.
In our interviews with family office heads, they all say the key to a productive investment process is to maintain focus in the face of fragmenting assets and multiple agendas. They all mention succession planning. And the internal debate over what to do with the money?
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