The decision for a corporate pension to outsource its investments has a wide range of outcomes for investment staff.
For CIOs of pension funds at which investments are outsourced, some retire shortly after—such was the case of Nokia’s Jeanmarie Grisi. In other cases, a defined benefit plan is outsourced following the retirement of an investment chief—the $25 billion Eli Lilly & Co. pension fund was outsourced to Goldman Sachs Asset Management last year following the retirement of CIO Susan Ridlen after 34 years at the company.
Rank-and-file staff members, however, tend to be at different places in their careers and unlikely to ride off into the sunset.
“There is no single outcome for investment staff,” says Owais Rana, managing director of investment solutions at Principal Asset Management. “This will vary widely based on the sponsor’s objectives; the internal team members’ skills, roles and responsibilities; whether the acquiring OCIO firm is able to utilize these resources in other client mandates; and, ultimately, whether there has been an agreement between the two parties on maintaining certain personnel post-transition.”
Some investment staff have found new homes at the OCIO manager that took over the plan’s investments—for example, the UPS investment team that oversaw a $43.4 billion plan outsourced to GSAM in 2024 joined Goldman following the transaction, including CIO Ernie Caballero.
Other investment teams are disbanded—Kodak’s pension fund, with a significant funding ratio of nearly 150%, was outsourced to NEPC in 2024, and CIO Thomas Mucha and others were out of a job. Kodak’s surplus assets were later used to pay down company debt.
Often, there is a middle ground in which certain staffers make the jump and others are left behind—in June 2021, British Airways Pensions outsourced management of £21.5 billion ($30 billion) of pension assets to BlackRock, one of the first such transactions for a U.K. pension fund. As part of the deal, several members of the BA pensions team joined BlackRock, “ensuring continuity of key institutional knowledge and the [pension] schemes’ strong operational and reporting culture,” according to a BlackRock statement at the time the deal was announced.
Dennis Simmons, executive director of the Committee on Investment of Employment Benefit Assets, noted via email that the toughest part of “life after OCIO” is often the loss of internal expertise.
“Once those staff roles are gone, it becomes much harder for a sponsor to monitor the provider or change course if the model stops fitting,” Simmons wrote. “Investment staff typically feel the impact first—not only because some work shifts or disappears, but because the ERISA oversight responsibility stays with the sponsor, even as execution moves outside.”
How It Happens
The decision to outsource a plan is typically made by the plan sponsor, Rana notes, with input from multiple C-suite stakeholders, as well as legal and financial executives. The outsourcing process can take between six months and a year, depending on the complexity of the plan and its portfolio, Rana says.
A report from Crisil Coalition Greenwich noted that “many plan sponsors believe budgetary constraints and lack of compensation competitiveness limits their ability to hire and retain top-notch investment professionals. Some of these institutions welcome the opportunity to transfer discretionary control to sophisticated external providers through the OCIO model and also see the potential to realize cost-savings through outsourcing.”
Corporate pension funds have increasingly outsourced their investments, as pension asset surpluses have risen to record levels and as the increasing complexity of investment management has become too much for what are often small teams to handle.
Staff Tensions
The decision to outsource pension fund investments often does not resonate well—not surprisingly—with internal investment staff, many of whom lose their jobs or are moved into oversight, governance and internal-stakeholder roles.
“In some cases, internal teams evolve into more governance-focused roles, setting policy, overseeing risk and managing external partners,” says Sutanto Widjaja, CIO of Farther Institutional. “In others, the transition is less defined, and that’s where you can run into challenges with alignment and retention.”
Some former corporate pension investment staff noted that several plans were unsatisfied with their OCIOs, generally due to misalignment between internal and external staff. Some corporate plan investors also noted strong opinions about the process, motivations, incentives and methods used by OCIOs to transactions and about whether plan participants remain a priority.
“Once internal teams are reduced, sponsors may find it difficult to unwind an OCIO arrangement if expectations aren’t met,” Simmons said. “Rebuilding internal capability—analytics, challenge function, institutional memory—can be challenging and time‑consuming.”
A report from investment manager and OCIO provider Schroders noted an increase in team-related OCIO transactions in which an investment team is lifted out of the pension to the asset manager, an increase driven by concerns about in-house team turnover and key person risk.
“Internal investment staff can sometimes resist a move to OCIO, particularly when it reduces their direct influence or creates concerns about role change and personal career risk,” Rana says, noting that resistance to outsourcing diminishes when the rationale to outsource is clear.
Shelly Heier, managing director and global head of institutional client service at Russell Investments,
“If you know one health system, you know … one health system. If you know one plan sponsor, you know … one plan sponsor,” Heier wrote. “No two organizations are the same, regardless of their line of work. An organization’s goals, circumstances, and preferences will always differ, and so will the attitudes of their principal decision-makers. The truth is that not all OCIO providers get this. As a result, they might try to slot you into a cookie-cutter solution that doesn’t work for your organization’s needs. Think round peg in a square hole.”
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Tags: Corporate pension funding, corporate pension funds, OCIO, outsourced chief investment officer, Outsourced CIO