What is the Outsourced Chief Investment Officer Model (OCIO)?
Essentially, the outsourced chief investment officer (OCIO) model permits to leverage the expertise of and skills of an external expert allowing the client to make changes in all dimensions of investment management front to back and to ensure faster implementation of decisions. The OCIO model behaves in a similar capacity as professional investment staff.
OCIO Model Drivers
In the 1980s and early 1990s, investing was less complex than it is today. The world is highly interconnected and markets increasingly volatile. There are accepted views that returns will be low for the near future. There are five major drivers in the demand for the OCIO model
- Independent external assessment of the strengths and resources within the organisation
- Evaluation of overall approach to investing, investment processes and strategies and potential adjustments
- Review of capabilities and skill sets of internal staff, infrastructure and all investment service providers front to back
- Difficulty of make or buy decisions, sourcing and engaging investment managers and investment service providers
- Need for deep consulting experience paired with investment experience, capital markets expertise and innovative portfolio construction capabilities
All these factors stem from a lack of internal resources. There is a clear connection: Firms that have little assets and small staff face operational constraints and decide to outsource.
Additionally this connects to the ability to not act fast enough on market trends and investments. Smaller internal resources inhibit a firm to take on tactical investing or opportunistic deals. Delegating some of these responsibilities to an OCIO frees up resources and increases speed of implementing decisions.