CFA Institute: Let’s Find Out How to Measure OCIO Performance

The industry group is working on adopting GIPS to apply to outsourced investment management.

Outsourced CIOs are a fast-growing part of the financial world, enabling asset allocators to farm out investment management. But how can institutions gauge the track records of OCIOs, a disparate group with wide-ranging approaches to investing?


The CFA Institute, the global association of investment professionals, is looking for an answer. It believes that tailoring Global Investment Performance Standards to measure OCIOs would accomplish that goal. The institute, best known for awarding the Chartered Financial Analyst designation to finance practitioners, created GIPS in 1987.


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Investment firms worldwide use these voluntary guidelines to deliver full disclosure and fair representation of financial performance.


So now the CFA Institute has put together a 15-member working group to create a GIPS version that can assess how OCIOs perform. The panel is to start in September and deliver a framework in early 2023.


“Our main goal is to determine what kind of guidance we need for the GIPS standards that is specific to OCIOs, and so we want input from the industry to help us make that determination,” Karyn Vincent, CFA’s senior head of global industry standards, told FUNDfire.


The OCIO space has had tremendous growth, expanding to an estimated $2.7 trillion this year from $90 billion in 2007, by the count of the Marquette Associates consultancy.


OCIO providers are under greater pressure to deliver investment returns these days, so adopting a GIPS standard would be a plus for them, according to the ACA Group, a consulting firm. “Today, the OCIO market is evolving with a greater focus on performance track records,” it said in a paper. “This puts pressure on OCIO providers to standardize practices around performance measurement and marketing.”


To the Spalding Group consulting firm, the vast array of asset classes that OCIOs cover is a large challenge. “OCIOs invest in pretty much every asset class, so valuation is more complex, relatively speaking,” said the firm in a news release.


Related Stories:

Many Asset Managers Are Eyeing Outsourcing, Per Northern Trust

The Appeal of OCIOs: Questing for Good Returns2022 Outsourced-Chief Investment Officer Survey


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