The best way to predict the future is to create it. ― Unknown

Our summer 2023 Outsourced Chief Investment Officer (OCIO) update features 101 firms, each with a designated contact individual and helpful hints to reach them: name, title, email, and phone number.  It’s the most comprehensive, accurate, and accessible available.

Our goal is to help families and institutions locate, review, and connect with full-service discretionary outsource investment managers.  As Henry Kissinger supposedly quipped when pondering a question on European leadership, “If you want to speak with Europe who do you call?”

The companies on our list care deeply about their customers.  Our directory makes it easy for prospective clients to reach them.

Holding On

For the year ending December 31st, 2022, OCIO providers managed to hold the line against volatile financial markets and investment headwinds, our new era of uncertainty to quote McKinsey.

Despite the Nasdaq losing a third of its value, 33%, the Russell 3000 down by 20.48%, the S&P 500 off 20%, and the Dow shedding 9%, total outsourced assets on our list dipped a tenable 9.5%, or $356 billion to $3.4 trillion.

It’s not all Strum und Drang, however, both Cerulli Associates’ OCIO Survey 2022 and Capgemini’s Wealth Management Top Trends 2023 expect healthy demand for OCIO services in the years to come.

According to Capgemini, “The growing complexity of assets, the necessity to adjust to volatile markets and uncertainties, access to experts, and shrinking investment management costs will heighten the profile of OCIOs.”

This is a common refrain from clients and contacts.  It’s expensive to support an institutional grade full-service asset management platform and it will only get worse.  Costs are climbing for infrastructure, cyber-security, regulatory audits and compliance, and access to liquid and alternative products and managers.

Given these challenges, there are only three ways most wealth and institutional money managers will grow — buy, sell, or merge.

This is just as true, by the way, for RIAs, which explains why so many are snuggling up to better resourced competitors.  Echelon Partners 2022 RIA M&A Deal Report tracked 340 announced transactions in 2022 alone, the tenth straight year of record acquisitions.

The Gang of Eight

At year end 2022 eight firms – Mercer, BlackRock, Russell Investments, Goldman Sachs, SEI, AON, SSGA, and WTW – managed about 52% of the total AUM on our list.  These eight providers with their size and resources dominate the largest segment, corporate pensions.

But the corporate defined benefit business is a land unto its own, actuarial, regulated, and liability driven, with big-ticket AUM on offer, $1.78 trillion among the top 100 US plans. In 2022, for example, BlackRock added $56 billion worth of new business from just two accounts, the $14 billion General Dynamics pension and the $42 billion Teamsters Central States Pension Fund.

Eight largest OCIOs by AUM

Source: Charles Skorina & Company

Promise-driven Investing

Unlike liability driven corporate plans which focus on funding levels and cost reduction, portfolio allocations in the ultra-high-net-worth and nonprofit segments reflect the goals, aspirations, lifestyle preferences, and risk tolerances of individuals and mission-based institution.

Jon Hirtle, executive chairman of Hirtle Callaghan, who pioneered the concept of an independent investment office managing family and institutional money – “the OCIO model” – describes the stewardship of client wealth as “promise-driven” investing.

When we ask our clients which risk matters most, they almost always place “mission failure” at the top of the list.  Serious investors care deeply about keeping their promises.

We promise our families that we will continue to live in a certain way, we promise to support the causes we care for and often we promise to help provide for our children and grandchildren.  In an institutional setting, we promise to support current needs as well as the needs of our community’s future.

Those promises can be tallied up to calculate a “required return.”  Achieve that required return and we can fulfill our promises; fail to achieve it and we are likely to disappoint the people and causes we love.

The OCIO option, a complete package

As a search-committee chairman remarked to me a while back, there are very few Tom Bradys or Patrick Mahomes to be had among endowment and foundation chief investment officers.  The accomplished stars and no-brainer candidates are mostly immovable.

Talent is still available, but you must look deeper and harder and move down to next-generation leaders who don’t have the long track-records that reassure nervous, risk-adverse boards.

OCIO firms offer the proven performance of those unobtainable super-stars 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.

Investors have had quite a ride the last few years.  With Covid and a market crash in 2020, stimulus frenzy and valuation-highs in 2021, a war in Ukraine and skyrocketing rates in 2022, is it any wonder so many families and institutions are looking for full-service professional investment support?

Most nonprofits and families just don’t have the time or resources to build competitive and secure internal capabilities, the OCIO option is an effective alternative.

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Our latest OCIO Company Directory

OCIO firms manage predominantly, but not exclusively, institutional assets, while RIAs manage mostly high net worth money with some institutional funds in the mix, so we have included a few RIAs.

If you are not on our list and feel you should be, send us a note.  We’re happy to add you.

(download OCIO Directory as PDF)