Chief Investment Officers (CIOs) are vital to an institutional investor’s team. They are responsible for handling the organization’s investments and ensuring they align with their goals and requirements.
However, the cost and complexity of hiring an in-house CIO are prohibitive for many institutional investors. They may also be overwhelmed with managing their portfolio, leaving little time to focus on their core operations.
Many institutional investors turn to outsourced Chief Investment Officers (OCIOs). According to a recent survey, the number of organizations engaging an OCIO has increased from 24 percent in 2020 to 33 percent.
Benefits of the OCIO model
The OCIO model allows organizations to delegate investment portfolio management to a full-time, skilled advisor. This leaves them free to invest their time and expertise in their core operations, knowing that the portfolio is in the hands of a knowledgeable professional.
Using an OCIO also allows organizations to benefit from specialized knowledge they may not possess in-house. For example, an OCIO may have access to a deep understanding of alternative investments, enabling them to select better options and maximize returns.
The same study revealed that most organizations expect to maintain their current asset allocation targets, but an increasing number are looking to increase their exposure to alternative investments. This indicates that these institutions understand the importance of diversifying their portfolios and the specialized expertise needed to navigate the oftentimes complex world of alternative investments.
Alternative investments like private equity, venture capital, and real estate must be handled and managed differently due to the various legal and investment complexities they involve compared to their public market equivalents. The right OCIO can curate a diversified portfolio considering the organization’s unique risk appetites and desired returns. This may include investments in new markets and more complex asset classes.
The gains from these moves may be tremendous, as alternative assets have long outperformed traditional public stock and bond markets. Institutional investors that have missed out on such opportunities or struggled with their understanding of these assets can leverage the expertise of an OCIO to benefit from the higher returns.
The OCIO model can also provide cost savings, removing the need to employ an in-house CIO or investment consultant to manage the portfolio. Finally, the OCIO model can make portfolio management more efficient, as the advisor can react quickly and exploit investment opportunities without waiting for approval from the organization’s investment committee.
Success with an OCIO
Successful implementation of an OCIO model requires you to find a reliable and trustworthy advisor and the right technology platform to manage it. Enter Gridline, a digital wealth platform that provides individuals access to professionally managed alternative investments at lower capital minimums, lower fees, and higher liquidity.
Gridline provides high-quality funds backed by top-quartile financial institutions to give individual investors fit-for-purpose exposure to non-public assets and help them build diversified portfolios. It’s the most efficient way for institutional investors to gain diversified exposure to alternative investments without sacrificing returns or liquidity.