The outsourced chief investment officer (OCIO) model continues to expand in its adoption and complexity. Nearly $2 trillion in assets are under OCIO management and is expected to grow significantly. There are many reasons it can make sense to outsource your chief investment officer (CIO) functions and duties, but finding the right OCIO manager is not an easy task. This is why it’s expected—and highly recommended—to partner with an OCIO search consultant who can guide both the Board of Directors and the Investment Committee through the selection process. Learn more about the key qualities of an OCIO search consultant and how your organization can benefit from a well-vetted consultant.
Key Qualities to Look For in an OCIO Search Consultant
OCIO search consultants can aid institutions in the search, evaluation and review of OCIO providers. They have a deep insight of the OCIO space and can guide clients in selecting a provider that best matches their needs. However, there are many search consultants to choose from. Below are the key qualities that organizations should look for in an OCIO search consultant.
Independence and Objectivity
A search consultant who is partial to a particular provider or has any sort of financial incentive to recommend one OCIO over the other lacks the necessary objectivity to help your organization make a decision in its own best interest. Your consultant should lack conflict or bias in doing the search and should have no problem disclosing any potential conflicts of interest.
Expertise
Just as an organization shouldn’t rely on an OCIO that can’t prove its expertise, it also shouldn’t rely on a consultant who isn’t able to provide some objective and verifiable measures of its own competency. This can include anything from prior experience in OCIO selection for similarly sized and situated entities, and client referrals.
Database of Providers
Starting the search process from scratch can be time-consuming and inefficient. Choose an OCIO search consultant that already has a database of providers from which to select and has already conducted due diligence on. While your organization shouldn’t be limited by this database if the listed OCIOs don’t meet your needs, such a list often provides a good starting point. The search consultant can suggest specific firms that align with your organization’s goals in which you can explore more deeply in an efficient manner.
Benefits of Utilizing an OCIO Search Consultant
The RFP/RFI Process
An OCIO search consultant will manage and execute the process of issuing and evaluating Request for Proposals (RFP) or Request for Information (RFI). The RFP or RFI requires potential candidates to provide specific information for further consideration. The information requested from providers not only include questions about their firm and business model, but also questions their investment philosophy, portfolio construction methodology, depth of research, and their servicing approach. Wading through hundreds of pages of information and data can be incredibly time-consuming. An OCIO search consultant can review and analyze these detailed responses.
Analyzing and Benchmarking During the Search
Once your organization has received responses, the OCIO search consultant can assist in creating workable benchmarks by which to analyze responses and generating a “shortlist” of finalists for whom further due diligence is needed. Many organizations opt for personal interviews with all finalists, as this provides the best opportunity to determine how well the OCIO will fit in with your company’s culture and performance objectives. An OCIO search consultant can provide you with an agenda and scoresheet for these meetings, which will allow your investment committee to gather the information necessary to make your final decision.
Negotiation
Your OCIO search consultant’s role doesn’t end once you’ve selected your OCIO provider. With special expertise in OCIO arrangements, the consultant can negotiate rates and fees and even manage your organization’s relationship with the OCIO going forward.
Management, Monitoring, and Adjustments
An OCIO that was once the perfect fit for a particular organization may, over time, lose its luster. A quality OCIO search consultant will have concrete, verifiable standards to assess the OCIO’s performance and make any changes that may be needed. Sometimes, this can be as simple as providing the current OCIO with performance standards to ensure that it’s operating within the parameters you’ve set. In other cases, this can mean going back to your former shortlist of OCIO candidates to make a new selection or even beginning the RFP process again.
How PlanPILOT Can Help
PlanPILOT is an independent registered investment advisor (RIA), not tied to any funds or investment banks, and we offer OCIO consulting services to help you find the best-fit investment manager for your organization. Let PlanPILOT guide you through the time and effort-consuming process of selecting or evaluating an OCIO provider. We are fully committed to making the search for your OCIO provider easier and more efficient.
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