A lot of success in life and business comes from knowing what you want to avoid ―Charlie Munger

Our fall 2024 Outsourced Chief Investment Officer (OCIO) update features one-hundred-four service providers with pertinent particulars on each.  We include names, numbers, emails, and titles of business executives at each firm ready to take your call.

Our goal is to help families and institutions locate, review, and connect with full-service discretionary outsource investment managers.  Our directory makes it easy for prospective clients to reach them.  No ads, no paywall, no charge.

A solid six months

For the six months ending June 30th, 2024, total OCIO AUM hit a record $4.456 trillion dollars on about $432 billion in new business, an impressive 10.73 percent gain.  But it’s not quite what it seems.

* See complete company listings by group in the appendix below

OCIOs and the multiverse

The OCIO business operates in two distinct realms, the mega-buck land of corporate pensions and a parallel universe of nonprofit institutions and family wealth. Pension plans focus on funding levels, risk mitigation, and cost reduction, while nonprofit entities and ultra-high-net-worth families attend to wealth stewardship, lifestyle preferences, and mission-based endeavors.

Well over half the OCIO money in our directory (probably closer to two-thirds) is pension money. This defined-benefit world is actuarial and liability driven, and heavily regulated. The largest firms with their size, resources, and appetites aggressively compete for pension money and dominate the segment, managing sixty-eight percent of our OCIO pie, about $3.046 trillion, up from sixty-four percent six months ago.

The largest firms have expertise across the board, of course, and manage substantial family and nonprofits assets, but corporate pensions are so large they skew the data.

These are big-ticket items. Recent corporate OCIO mandates include the $43.4bn UPS plan awarded to Goldman Sachs, Shell’s $30bn defined benefit pension headed to Blackrock, and Nokia’s $13.9bn plan  transfer to Mercer.

* Complete company listings by group in the appendix below
** CAPTRUST manages mostly RIA money
*** JPM OCIO assets within their endowment & foundation group

How we report

We do not separately list pension versus nonprofit and family wealth assets for two reasons.  First, the industry has no standard reporting template for OCIO assets.  Pensions & Investments does their best to break out the categories, but companies can report what they want the way they want as long as regulatory requirements are met.

And second, our executive recruiting and OCIO search and selection business focuses on nonprofits, family offices, and middle-market asset managers, so we leave the mighty pension world to others.

Consolidation

This year has been a busy time for M&A.  The eighty-two firms under fifty billion on our list manage about $754bn among them, mostly nonprofit and family money.  However, many of the founders and original partners are aging out and because most firms are privately owned, converting equity to cash is a challenge.

But one man’s problem is another’s opportunity. Private equity firms and RIA aggregators are well aware of the challenges OCIOs face and delighted to step in with liquidity, in exchange for ownership.

Last month, RIA aggregator Hightower and wealth manager Pathstone announced OCIO acquisitions, Hightower procuring a majority interest in NEPC and Pathstone buying Hall Capital Partners.

Earlier in the year Edgehill called it quits, Agility sold to Cerity Partners, and Vanguard’s OCIO team moved en masse to Mercer. And in recent years Truvvo, Ellwood Associates, New Providence, CornerStone, PFM, and Permit Capital all decamped for better-resourced patrons. There will certainly be more.

Final thoughts

OCIO providers offer the proven performance of in-house investment staffs at a reasonable price.  And they can replicate the entire investment office with the process and structure to cope with the complexity of modern portfolios and mounting operational and regulatory burden.

But fielding a full-service institutional grade practice is expensive and costs are soaring for compensation, cyber-security, audits, and compliance, to say nothing of rampant regulatory hurdles.

It takes years to fully hone systems, service, succession, and investment capabilities. Hirtle Callaghan and Blackrock opened for business in 1988, McMorgan & Company set up shop in 1969, and Brown Brothers Harriman and JPMorgan Chase  hung their shingles over two hundred years ago.

Most nonprofits and family offices, basically anyone under $500 million in investable assets, don’t have the time or resources to build competitive and secure internal investment capabilities, the OCIO option is an effective and time-tested alternative.

―Charles Skorina

(download OCIO Directory as PDF)