Increased Use of OCIO for Independent Schools

April 21, 2025 |
2 minute read
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Increased Use of OCIO for Independent Schools
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Data from the 2024 Commonfund Benchmarks Study of Independent Schools (CSIS) show that schools across the size spectrum reported an increase in use of an outsourced chief investment officer (OCIO) for investment management in FY2024. The share of total schools that reported using an OCIO increased to nearly half (46 percent), from one third (33 percent) in FY2023.

The biggest gap-up came from mid-sized schools—59 percent of which reported using an OCIO in FY2024 compared with 40 percent in FY2023. Forty-three percent of the largest responding institutions used an OCIO in FY2024, as did 26 percent of the smallest. 

Use of OCIO for Investment management on the rise in FY2024

The exploration of top concerns and the increasing use of endowment to cover operating expenses in the recent blog "Independent Schools Increasingly Depend on Endowments for Operations," all point to the endowment needing to work harder in support of the institution. With that context, it is unsurprising that more independent schools are turning to outsourcing for investment management.

What key responsibilities are independent schools seeking to outsource? When asked about the primary responsibility for various investment functions1, independent schools overall and across asset sizes were most likely to use an OCIO for day-to-day investment management, capital markets research, and portfolio rebalancing. More than half of responding schools with assets between $10 million and $50 million reported using an OCIO for each of those three functions, whereas roughly 35 percent of the largest schools did. Schools with assets under $10 million were more likely to have an internal IC/Board or a consultant with primary responsibility over the surveyed investment activities. However, the percentage of the smallest schools that used OCIO for day-to-day investment management doubled to 24 percent in FY2024 from 12 percent in the prior year.

OCIO usage increases across three key investment-related activities

Finally, resource constraints may lead institutions to seek external support for investment management. One key resource constraint is the number of investment committee members, and their credentials that support investment management decision-making. In FY2024, independent schools reported they had an average of 6.9 investment committee members, and an average of 4.9 of whom are investment professionals. Larger schools have more investment committee members (8.1 on average) and more members that have professional investment experience (6.3 on average), compared with the other size cohorts. When asked how many investment committee members have experience with alternative strategies, the average response for large schools was 4.9, for mid-size schools, 3.5, and for small schools, 1.6. Limited resources and expertise at mid-sized and smaller schools likely contribute to their relatively high use of an OCIO for investment management.

The use of OCIO in independent schools is a developing trend that we continue to monitor. Between increasing market volatility and complexity, the pressures on the endowment to provide more to meet the mission of the institution, and internal resource constraints, it may continue into future years. 

 

  1.  The surveyed investment-related activities included day-to-day investment management, asset allocation, portfolio rebalancing, manager selection & due diligence, IPS development, and capital markets research.
Commonfund Institute

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Commonfund Institute

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Disclaimer

Certain information contained herein has been obtained from or is based on third-party sources and, although believed to be reliable, has not been independently verified. Such information is as of the date indicated, if indicated, may not be complete, is subject to change and has not necessarily been updated. No representation or warranty, express or implied, is or will be given by The Common Fund for Nonprofit Organizations, any of its affiliates or any of its or their affiliates, trustees, directors, officers, employees or advisers (collectively referred to herein as “Commonfund”) or any other person as to the accuracy or completeness of the information in any third-party materials. Accordingly, Commonfund shall not be liable for any direct, indirect or consequential loss or damage suffered by any person as a result of relying on any statement in, or omission from, such third-party materials, and any such liability is expressly disclaimed.

All rights to the trademarks, copyrights, logos and other intellectual property listed herein belong to their respective owners and the use of such logos hereof does not imply an affiliation with, or endorsement by, the owners of such trademarks, copyrights, logos and other intellectual property.

To the extent views presented forecast market activity, they may be based on many factors in addition to those explicitly stated herein. Forecasts of experts inevitably differ. Views attributed to third-parties are presented to demonstrate the existence of points of view, not as a basis for recommendations or as investment advice. Market and investment views of third-parties presented herein do not necessarily reflect the views of Commonfund, any manager retained by Commonfund to manage any investments for Commonfund (each, a “Manager”) or any fund managed by any Commonfund entity (each, a “Fund”). Accordingly, the views presented herein may not be relied upon as an indication of trading intent on behalf of Commonfund, any Manager or any Fund.

Statements concerning Commonfund’s views of possible future outcomes in any investment asset class or market, or of possible future economic developments, are not intended, and should not be construed, as forecasts or predictions of the future investment performance of any Fund. Such statements are also not intended as recommendations by any Commonfund entity or any Commonfund employee to the recipient of the presentation. It is Commonfund’s policy that investment recommendations to its clients must be based on the investment objectives and risk tolerances of each individual client. All market outlook and similar statements are based upon information reasonably available as of the date of this presentation (unless an earlier date is stated with regard to particular information), and reasonably believed to be accurate by Commonfund. Commonfund disclaims any responsibility to provide the recipient of this presentation with updated or corrected information or statements. Past performance is not indicative of future results. For more information please refer to Important Disclosures.