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Outsourced investment management, once primarily a solution for small institutions with limited resources, is now used by a broad range of long-term investors. When properly implemented, outsourcing can help institutions with both large and small asset pools to address portfolio complexity and risk management challenges. Employing this model allows institutions to benefit from more timely decision-making and contend with an increasingly rigorous regulatory environment, while enabling trustees to focus on institutional governance.

What is Outsourced Management (OCIO)?

OCIO is the practice of delegating a significant portion of the investment office function to a third-party provider, typically an investment management or consulting firm. The terms “outsourced chief investment officer” or “OCIO” are frequently used to describe this process, which encompasses a wide range of models depending on the degree to which the institution commits itself to delegation of investment discretion and the operational methodology it employs in carrying out its decision.

Smaller institutions may benefit from a set of efficient and standardized portfolio choices, while for mid-sized and larger investment pools the outsourcing provider designs a customized solution for the institution based on its risk tolerance, return targets and other requirements. Such a comprehensive approach includes investment policy review and counsel as well as implementation via portfolio construction and asset allocation, manager due diligence and ongoing monitoring, portfolio rebalancing, risk management and reporting. The OCIO provider thus assumes responsibility for the institution’s entire investment process, filling a role equivalent to that occupied, at institutions with very large investment pools, by the internal investment office staff.

Implementation of outsourced management requires attention to the governance model that will be employed. The extent to which investment discretion is delegated by the institution’s board of trustees to the outsourcing provider depends upon the preferences, needs and capabilities of the trustees, the investment committee and the OCIO provider. Some institutions may prefer that the investment committee and staff retain hands-on control, remaining involved in all investment decisions. Other institutions and committees may find it best to delegate essentially the entire investment function to the OCIO provider, retaining approval of only the highest-level portfolio policies such as the setting of strategic asset allocation targets.

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Information, opinions, or commentary concerning the financial markets, economic conditions, or other topical subject matter are prepared, written, or created prior to printing and do not reflect current, up-to-date, market or economic conditions. Commonfund disclaims any responsibility to update such information, opinions, or commentary. To the extent views presented forecast market activity, they may be based on many factors in addition to those explicitly stated in this material. 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. Managers who may or may not subscribe to the views expressed in this material make investment decisions for funds maintained by Commonfund or its affiliates. The views presented in this material may not be relied upon as an indication of trading intent on behalf of any Commonfund fund, or of any Commonfund manager. Market and investment views of third parties presented in this material do not necessarily reflect the views of Commonfund and Commonfund disclaims any responsibility to present its views on the subjects covered in statements by third parties. 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 Commonfund fund. Such statements are also not intended as recommendations by any Commonfund entity or 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. Past performance is not indicative of future results. For more information please refer to Important Disclosures.

Disclaimer

Information, opinions, or commentary concerning the financial markets, economic conditions, or other topical subject matter are prepared, written, or created prior to printing and do not reflect current, up-to-date, market or economic conditions. Commonfund disclaims any responsibility to update such information, opinions, or commentary. To the extent views presented forecast market activity, they may be based on many factors in addition to those explicitly stated in this material. 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. Managers who may or may not subscribe to the views expressed in this material make investment decisions for funds maintained by Commonfund or its affiliates. The views presented in this material may not be relied upon as an indication of trading intent on behalf of any Commonfund fund, or of any Commonfund manager. Market and investment views of third parties presented in this material do not necessarily reflect the views of Commonfund and Commonfund disclaims any responsibility to present its views on the subjects covered in statements by third parties. 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 Commonfund fund. Such statements are also not intended as recommendations by any Commonfund entity or 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. Past performance is not indicative of future results. For more information please refer to Important Disclosures.