5 Things to Consider When Choosing an OCIO

October 1, 2015 |
1 minute read

Nearly all CFOs and investment committees consider it. And more than ever are acting upon it: investigating the possibility of an Outsourced CIO (OCIO) to manage their institution’s investments.

The Essential P’s

There are typically two “essential P’s” to consider when assessing potential OCIO providers —  People and Processes. But once that due diligence is completed, and the evaluation process enters the final stretch (that is, the waning pages of an RFP), it comes down to two more Ps that are just as critical: Performance and Price. And this is where the reporting can get a little muddy.

And here’s why: While OCIO providers’ people and processes are relatively easy to compare and contrast to determine their value, performance and price are areas where such simple and direct comparisons are more difficult to make. Neither performance nor price lends itself to a simple check-the-box evaluation. Instead, crafting comparisons is a complex apples-to-oranges exercise, because there are so many variables to consider in each of those categories.

Complex, but not impossible: Here are some criteria for comparing the price and performance of OCIO candidates.

Criteria for Comparison

  1. Performance – The challenge in determining an OCIO’s performance begins with the question of how exactly one defines the term

  2. Price – Many institutions conducting an OCIO search will claim price doesn’t matter. But everyone knows that it does.

  3. Fees vs. costs – One challenge in determining total outlay for investment management is, frankly, defining one’s terms, as in fees paid vs. total costs incurred.

  4. Added Value – Another important consideration in comparing fees is understanding an OCIO’s additional duties and resulting value.

  5. Fee models – There are several different types of fee models in the OCIO realm, and it’s important to peel the onion (again) in order to decipher them.

At first glance, performance and price may seem straightforward, quantitative measures. But they are far from simple metrics. History has shown that it actually takes more time and effort to decipher these two seemingly quantitative factors than the qualitative ones, such as people and processes.

While complex, it’s by no means impossible. The below eBook provides some criteria for comparing the price and performance of OCIO candidates. In this document, we’ll uncover factors to consider when hiring an OCIO, as well as tips for comparing performance.

If you’re considering outsourcing a CIO for your institution, make sure to download the full article, Of Apples, Oranges and Onions: Assessing OCIO Performance and Fees.  

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