Tips on Searching for the Best OCIO in a Growing Market

RFPs, shortlists and when to hire a search firm.

With Outsourced Chief Investment Officers (OCIO) on the rise, institutional investors are increasingly weighing the option to entirely outsource the responsibility of asset management decisions to these professional investment firms.

According to Natixis’s 2016 Global Survey of Institutional Investors, nearly $2 trillion in worldwide assets are managed by OCIO investment firms, with the trend expected to continue far into the future. With that said, this surging market demand bears the question: how should investment committees go about choosing the right OCIO?

There is currently no uniformed template or set of standards to aid institutions in the search and selection of the ideal OCIO. As the OCIO model’s popularity flourishes, institutional investors looking to make that transition should consider a comprehensive search process before making their selection. 

Lack of OCIO Evaluation Standards

A lack of standardized track records, limited capabilities, and weak governance are examples of potential risks and pitfalls institutions must navigate when finding the right OCIO firm. Historically, institutions would always require standardized and verifiable track records (i.e. GIPS compliant) in order to invest in a single strategy manager, but ironically, many institutions will often hire an OCIO to run a portfolio without even asking to see a track record.

On the occasions OCIOs do provide track records and performance histories, the selection is very minimal, as man OCIOs often choose examples selectively. OCIOs often stand by the idea that performance will be strictly based on the individual’s situation, making past history less relevant. For those reasons, institutions that hired OCIOs without an intricate evaluation will likely find themselves re-evaluating their relationships and potentially make changes in the coming years.

Beginning the Search and Selection Process

Sharing fiduciary oversight is an important aspect for institutions choosing to make the transition to an OCIO model. In fact, a 2019 survey conducted by reflected that 68 percent of institutional investors considered additional oversight the most important or critical reason for their decision. 

While it can make sense to outsource CIO functions for various reasons, finding and hiring the right OCIO manager is an overwhelming task. To begin the process, an organization should decide on an investment philosophy and an overall objective for transitioning to the OCIO model. A search designed to find the best, elite, and discretionary managers will add value to the institution.

Once the philosophy and mission of the search are decided, the process moves to the request for proposal (RFP) stage. The RFP is distributed to qualified providers, allowing the institution to assess available firms broadly. A search consultant can provide assistance in crafting a thorough RFP, a necessity for comparing providers in a field with no standards regarding performance or fee structure.

A well-constructed RFP process will help the investment committee understand the OCIO market. That is vital for making a smart decision for a long-term partner. A detailed, quantitative assessment of past performance should also be conducted with the RFP to help avoid cherry-picked responses. A performance evaluation that provides more than a simple comparison of trailing absolute returns or component performance will ensure an institution will hire a competent money manager.

Next, institutions should select a short-list of firms that could offer them a comprehensive solution and then conduct further due diligence. Once finalists are selected, schedule face-to-face meetings, as this will provide a better perspective and understanding of the firm’s background and culture. Meeting face-to-face with a few different firms will allow the institution to be able to differentiate one from another, and overall, pick the firm best suited for them. Meetings should be looked at as a due diligence exercise, not just ‘sales pitches’; and a search consultant can help create a standardized agenda to compare and contrast each firm.

Utilizing A Search Consultant

Transitioning to an OCIO model is not an easy task. That is why it’s highly recommended, and typically expected, to connect with a search consultant to guide both the board of directors and investment committee through the process.

Competent search consultants can provide an organization with clarity about investment objectives, risk tolerance, and responsibility-sharing before the RFP process even begins. The search industry is an emerging market with new consultants constantly emerging. While searching for a consultant, keep in mind whether the consulting firm has extensive experience conducting OCIO searches and what their processes includes for assessing OCIO performance. SEC registration and complete objectivity should also be verified. It’s important to set clear criteria before the search in order to find the ideal consultant. 

Institutions have consciously moved toward outsourcing the investment process to maximize asset performance while benefiting from shared fiduciary responsibility. Outsourcing is a decision each organization must make for itself, but the OCIO is a valuable tool if selected properly. Working with a search consultant will not only ease the transition process but will help determine the best OCIO for any given institution.

Joshua MacKenzie is Senior Analyst at North Pier Search Consulting, a Los Angeles-based firm. Learn more at

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