University endowments, especially at smaller institutions, have been using outsourced CIO providers at an increasing rate, as these investors find themselves with fewer resources to navigate the increasing complexity of portfolio management.
“The numbers would suggest that the larger and dominant organizations do continue to have investment staff, and then smaller organizations are generally managed by boards or finance or investment committees,” says Erika Murphy, a portfolio manager at Fidelity Investments. “So there has been a trend to take some of those organizations and move them toward the OCIO model, just because they’re not able to support full investment-team resources at smaller AUM sizes.”
Several OCIO providers have grown in the endowment-and-foundation market. According to CIO’s 2025 Outsourced Investment Manager Survey, half of endowments are currently outsourcing some functions of their investment office or are considering doing so.
According to the 2025 NACUBO-Commonfund study of endowments, OCIO use was highest among funds with between $101 million and $250 million in assets under management, at 61.3%. Among the smallest funds in the survey, approximately 51.4% endowments with less than $50 million in assets and 55.8% of endowments with between $51 million and $100 million in assets outsourced their investment management.
Approximately 57.1% of endowments with between $251 million and $500 million reported using an OCIO, but as endowment size gets closer to $1 billion, OCIO use tapers off. Of endowments with between $501 million and $1 billion, 35% reported OCIO use, and among those with between $1 billion and $5 billion, 23.3% reported using an OCIO.
No endowments with more than $5 billion in assets reported using an OCIO, as these funds are generally well-staffed and have the size and scale to efficiently manage an in-house investment team.
Handling Increasing Complexity
A smaller team means that many investment functions—including manager selection, due diligence and other operational tasks—take up valuable resources and time, especially as alternative investments become a larger part of endowment portfolios. Smaller endowments are also choosing to outsource because, on their own, they may not be able to access top-tier managers.
“If you’re not one of the very large ones that have a very long-standing alternatives, private equity portfolio and a large team, you really don’t have the kind of expertise in house to be able to source those great investment ideas,” says Ravi Venkataraman, managing partner in consultant Chestnut Advisory. “In that case, you could find it pretty attractive to go to a specialized third party [for] expertise such as OCIO.”
A paper from OCIO Analytics this month noted, based on returns from 2015 through 2025, the spread between the annualized returns of 75th- and 25th- percentile private equity managers was 20.5%. Among other alternative asset classes like hedge funds and venture capital, OCIO Analytics noted gaps of 14.7 and 19.1 percentage points between top- and bottom-tier managers.
The gap between the best- and worst-performing managers was less prominent among public asset classes—for large-cap equity managers, that spread was only 2.6 percentage points, while the spread for fixed-income managers was 1.5 points.
“For endowments, the thought process can be, ‘Hey, we can handle public equities internally, and we’ve been hiring and firing managers, but when it comes to alternatives, it takes a disproportionate amount of resources to manage that portfolio,’” Venkataraman says. “‘Why don’t we go out and get help with that piece?’”
The increasing complexity of manager selection can also take up the resources of smaller investment teams, especially as more alternative investment managers and strategies have emerged over the last few decades.
“If you take an asset class like venture capital, it’s one of many that endowments do invest in, [and] beyond doing the work of figuring out how much to allocate to asset classes like venture, you’ve got to select the funds to invest in,” said Tim Yates, the CEO of Commonfund OCIO, in August 2025. “In the late 90s, there were something like 700 venture firms, so if you’re going to invest in 10 to 20 of them, that’s challenging, but it’s perhaps doable. Today, there’s something like 6,000, [almost] 10 times the number of venture firms, and so that exponential increase creates a massive resource disconnect.”
Sona Menon, head of OCIO at Morgan Stanley Wealth Management, says at “some colleges and universities, their investment committee feels the need to have shared fiduciary oversight of the portfolio, because they feel it’s important to have an external professional minding the portfolio on a daily basis, as opposed to maybe a quarterly basis” if it were handled internally. “Governance often drives that decision, … [and] a really important driver is having dedicated investment operations—middle and back office support—which many of these colleges and universities that have a smaller staff, they’re not able to do that internally and don’t have the time and the resources to focus on that. The decision [to outsource] is complex, and it’s not just about what size the asset pool is.”
Evaluating OCIOs
A 2024 report from Commonfund noted eight metrics that organizations should consider when selecting an OCIO provider: capabilities and flexibility; track record; partnership and relations with clients; ability to provide leadership for clients; firm structure and business model; geographic location; fees; and the OCIO’s investment team itself.
“When [they’re] making a decision to hire an OCIO, I encourage organizations: Go take an office visit, go be on site, go meet the investment team in their offices, and see what the collective team looks like, the office feels like, and spend a day there,” says Garrett Wilson, managing director at Hirtle & Co. “I’m pretty sure you would never hire an internal CIO without spending a lot of time [with the candidate] in person, understanding that person’s motivations, what drove them into this business, how do they work together. … The single largest asset that most of these organizations have is their endowment. … It needs full-time, very-well-run oversight.”
Tags: asset management CIO, Endowments, OCIO, outsourced chief investment officer