2021 Outsourced-Chief Investment Officer Survey

2021
Outsourced
Chief Investment
Officer Survey
Art by Daniel Schaffer

Reprinted from ai-cio.com April 2021. ©1989-2021 Chief Investment Officer is owned by ISS. All Rights Reserved. 1
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 2021 Outsourced-Chief Investment Officer Survey

A lack of internal resources is the

biggest reason why CIOs farm out
investing chores to third parties.
T
he overwhelming reason that institutional investors desire for gains towers over caution.
outsource investment management is a lack of internal This comes during a spectacular bull market, which took off
resources. That’s the key finding in our 2021 Outsourced in late March 2020. Our survey, conducted from early February
Chief Investment Officer (OCIO) Survey, with 79% of outsourcers to mid-March of this year, illustrates how riding surging
saying that factor is important or very important in their decision. investments overshadows any qualms about the pandemic. Still,
Consider the Fred Hutchinson Cancer Research Center, caution does have a place in investors’ thinking. Some 76% believe
which has a $125 million endowment and a $500 million strategic that better risk management is important or very important to
pool, which it uses to power its programs. The small Seattle- hiring an OCIO—only 3% said it was not important.
based medical research organization, named after a major league The bulk of OCIO clients (72%) farm out all of their
baseball player and manager who was with the Detroit Tigers and portfolios, versus 7% who outsourced less than 25% of their
the Cincinnati Reds before his death from lung cancer in 1964, holdings. And those that give their OCIOs the authority to
has a one-person investment operation. That would be Herbert hire and fire managers and select investments, known as “full
Bone, its corporate treasurer. discretion,” are in the majority, with 54%. But 46% opt for only
“I’m it. There’s no staff,” said Bone, who enlisted JPMorgan to “partial discretion,” which retains them some say.
help Fred Hutch, as his organization is known. This relationship Our survey presents a thorough scan of the OCIO universe.
has given his small shop a reach that it otherwise wouldn’t possess. Corporate pensions made up 44% of respondents, and public
“We wouldn’t have the capacity to invest in hedge funds” without pension programs were at 39%. Most of them pay a flat fee, and
the Wall Street giant’s assistance, he noted. He outsources the none pay performance fees. —Larry Light
endowment to JPM; the strategic pool is lodged in index mutual
funds and thus needs no manager.
The dispersion of funds that opt for an OCIO tilts toward METHODOLOGY
the smaller ones. According to the survey, 31% of the respondents Responses from 85 asset owners, aggregated for the charts that
using an OCIO have assets of less than $500 million. Those follow, were accepted for the survey from February 8 to March 16,
between $500 million and $5 billion make up 46%, with the 2021. CIO would like to extend a special thank you to all those
larger plans, over $5 billion, at 24% (these are rounded figures). who submitted responses for the survey, as well as those vendors,
What’s the chief investment function that institutions hire an asset owners, and consultants who helped the CIO editorial and
OCIO to perform? Absolute return, with 64% saying they sought survey teams construct the survey. For more information, contact
that goal. That outpaces de-risking (36%), which shows that a [email protected].

Reprinted from ai-cio.com April 2021. ©1989–2021 Chief Investment Officer is owned by ISS. All Rights Reserved. 2
For Internal Use Only—Not For External Distribution. This document is not to be copied, distributed or reproduced in whole
or in part, nor passed to any third party. For information, call (203) 595-3276 or email [email protected].

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 2021 Outsourced-Chief Investment Officer Survey

Respondent Profile

Respondent Organization Type

Corporate Pension 30%
Public Pension 21%
Endowment/Foundation 33%
401(k), 403(b), 457 DC plan 30%
Other 7%

Respondent Regions Represented

Europe/Pacific/Other 9%
Canada 12%
USA 79%

Respondents by Total Investable Portfolio Size

<$500mm 31%
$500mm –$5b 46%
>$5b 24%

Staffing

Average Size of Investment Staff by Organization Type

Corporate Pension 5
Public Pension 5
Endowment/Foundation 3
401(k), 403(b), 457 DC plan 3
Other 2

Average Size of Investment Staff by Region

USA 3
Canada 4
Europe/Pacific/Other 10

Average Size of Investment Staff by Investable Portfolio Size

<$500mm 1
$500mm –$5b 2
>$5b 11

Reprinted from ai-cio.com April 2021. ©1989–2021 Chief Investment Officer is owned by ISS. All Rights Reserved. 3
For Internal Use Only—Not For External Distribution. This document is not to be copied, distributed or reproduced in whole
or in part, nor passed to any third party. For information, call (203) 595-3276 or email [email protected].

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 2021 Outsourced-Chief Investment Officer Survey

Outsourcing Arrangements

Respondent Outsourcing Situation

Plan to outsource in the next 24 months 30%
Currently outsource 1%
Do not outsource and no plans to do so 35%
Plan to outsource in the next 12 months 60%

% That Outsource or Plan To by Organization Type

Corporate Pension 44%
Public Pension 39%
Endowment/Foundation 43%
401(k), 403(b), 457 DC plan 56%
Other 33%

% That Outsource or Plan To by Region

USA / Canada 39%
Europe / Pacific 50%

% That Outsource or Plan To by Investable Portfolio Size

<$500mm 58%
$500mm –$5b 38%
>$5b 20%

Reasons for Outsourcing

Average Size of Investment Staff by Organization Type

1=Not at all important; 5=Very important
Score 1 2 3 4 5

Better risk management 4.1 3% 7% 17% 24% 48%

Cost savings 3.4 10% 17% 21% 28% 24%
Lack of internal resources 4.1 3% 7% 10% 38% 41%
Additional fiduciary oversight 3.8 7% 0% 28% 34% 31%
Need to increase returns 3.4 14% 10% 21% 28% 28%
Faster implementation/decisions 3.7 7% 10% 24% 28% 31%
Desire for strategic partnership 3.2 17% 14% 21% 28% 21%

Reprinted from ai-cio.com April 2021. ©1989–2021 Chief Investment Officer is owned by ISS. All Rights Reserved. 4
For Internal Use Only—Not For External Distribution. This document is not to be copied, distributed or reproduced in whole
or in part, nor passed to any third party. For information, call (203) 595-3276 or email [email protected].

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 2021 Outsourced-Chief Investment Officer Survey

Reasons for Outsourcing

Outsourcing Goals
All respondents <$500 mm $500 mm –$5b >$5b

Absolute return 64% 71% 58% 50%

De-risking 36% 29% 42% 50%

Fee Structures

Outsourcing Fee Structure

All respondents <$500 mm $500 mm –$5b >$5b

Flat basis point fees ONLY 59% 50% 69% 50%

Sliding asset-based fees ONLY 17% 21% 15% 0%
Multiple or Other fee structures used 24% 29% 15% 50%
Performance fees ONLY 0% 0% 0% 0%

Non-Outsourcers

To your knowledge, have any OCIO providers attempted to win your business in the past 12 months?
All respondents <$500 mm $500 mm –$5b >$5b

No 77% 73% 79% 76%

Yes 23% 27% 21% 24%

Reasons for Not Considering an Outsourcing Arrangement and Their Importance

1=Not at all important; 5=Very important
Score 1 2 3 4 5

Execute better risk management in-house 3.8 9% 0% 28% 25% 38%

Cost 4.0 6% 4% 17% 30% 43%
Sufficient internal expertise 4.1 6% 2% 8% 45% 40%
No need for additional fiduciary oversight 3.5 9% 6% 32% 28% 25%
Satisfied with returns produced internally 4.2 4% 0% 9% 45% 42%
Satisfied with speed of implementation 4.0 4% 2% 21% 40% 34%
No desire for partnership with outside firm 3.3 19% 6% 28% 25% 23%

Reprinted from ai-cio.com April 2021. ©1989–2021 Chief Investment Officer is owned by ISS. All Rights Reserved. 5
For Internal Use Only—Not For External Distribution. This document is not to be copied, distributed or reproduced in whole
or in part, nor passed to any third party. For information, call (203) 595-3276 or email [email protected].

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 2021 Outsourced-Chief Investment Officer Buyer’s Guide
A total of 47 firms that offer Outsourced Chief Investment Officer (OCIO) services volunteered ­information this year. For the purposes of this guide, “full discretion” is defined as the OCIO firm
having the authority to hire and fire managers without prior client approval. Total full discretionary assets under management represented by these 47 firms is $2.1 trillion among 13,323 clients.
Median discretionary assets are $16 billion. An Excel data file, containing more information on each provider, is available by contacting [email protected]
Discretionary* Assets by Fund Type
Year No. of No. of OCIO OCIO No. of
Entered Relationship OCIO % of Assets, Clients,
Business Into OCIO Managers/ Portfolio Total Firm Full Full Defined 401(k), 403(b), Endowments/ Health
Provider Model/Type Business Salespeople Managers Revenue Discretion Discretion Benefit Other DC Foundations Care Other

Aetos Alternatives Management OCIO + other 2003 4 4 31% 5 $2.2b $922mm $1b $222mm

Agility OCIO only 2007 6 5 100% 40 $11.9b $80mm $11.1b $740mm

Alan Biller and Associates Implemented consulting 2006 4 4 75% 29 $59.4b $56b $22mm $19mm $2.8b $521mm

Angeles Investments Proprietary/ non-proprietary 2002 8• 6 62% 53 $5.1b $1.4b 122mm $1.7b 111mm $1.8b
Does not
Aon OCIO + other 2010 8 7
disclose
182 $136.4b $94.3b $38.9b $1b $633mm $1.6b

Artemis Wealth Advisors OCIO only 2009 2 2 100% 13 $1.2b

Does not
Bank of America Private Bank OCIO + other 1853 224 35
report||
487 $27.8b $10b $17.7b

BlackRock Proprietary/ non-proprietary 2005 106 $145.4b $123.3b $629mm $7.2b $14.4b
Does not
BNY Mellon Proprietary/ non-proprietary 1975 13 13
disclose
371 $16.7b $7.5b $1.3b $3.5b $4.4b

Cambridge Associates OCIO only 2001 18% 111 $36.9b $13.2b $15.3b $2.3b $6.1b

Canterbury Consulting Implemented consulting 2012 9 4 13% 25 $1.1b $651mm $372mm

Commonfund OCIO + other 2001 12 12 35% 75 $11b $10.4b $508mm

Disciplina Group OCIO only 2013 2 5 100% 14 $1b $12mm $799mm $230mm $11mm

Discretionary Mgmt Services OCIO + other 2003 5 3 100% 25 $1.5b $1.1b $67mm $303mm

FEG Investment Advisors OCIO + other 2003 14 7 38% 104 $6.8b $332mm $24mm $3.5b $2.9b
Not
Fidelity Institutional Asset Mgmt Proprietary/ non-proprietary 1998 8 4
available
78 $18.1b $8.6b $9.5b

Global Strategic Investment Solutions OCIO only 2015 3 3 100% 64 $710mm $4mm $3mm $151mm $552mm

Goldman Sachs Proprietary/ non-proprietary 1995 428‡ 499 $157.2b $88.1b $8.8b $20.1b $2.8b $37.4b

Hall Capital Partners LLC (HCP) OCIO only 1994 $13.3b $4.1b $9.2b

Hirtle, Callaghan & Co. OCIO only 1988 5 20 100% 200 $17.7b $1.1b $700mm $7.1b $1.8b $7b

J.P. Morgan Asset & Wealth Mgmt Proprietary/ non-proprietary 1988 925 65 388 $66.9b $23.3b $18b $264mm $25.3b
Not
LCG Associates Implemented consulting 2012 13 13
available
8 $951mm§ $443mm§ $508mm§

Marquette Associates Implemented consulting 2010 37 11 13% 119 $11.4b $8.6b $41mm $711mm $854mm $1.2b

Meketa Investment Group Implemented consulting 2006 30% 61 $19.8b $13.3b $4.3b $1.5b $400mm $300mm

Mercer OCIO + other 1995 295 104 1531 $348.4b $175.7b $86.7b $22.7b $2.5b $60.8b

Mill Creek Capital Advisors OCIO only 2006 8 12 100% $7b $1b $250mm $1.9b $400mm
Does not
Morgan Stanley & Co. LLC OCIO only 1992 6 21
report
271§ $37.8b§ $21.6b§ $581mm $10.1b $787mm $4.7b

NEPC, LLC† OCIO + other 2011 1 5 24% 59 $42.1b $16.8b $16b $2.8b $3.6b $2.9b¶
Not
Northern Trust Corporation OCIO + other 1979 43 49
available
461 $99.6b $43.8b $6.8b $10.8b $1.3b $37b

Partners Capital Investment Group OCIO only 2001 1 27 92% 117 $20b $609mm $9.6b $9.8b

PFM OCIO + other 2001 10 5 17% 236 $16b $4.1b $5b $1.8b $5.2b
Not tracked
PNC Institutional Asset Mgmt Proprietary/ non-proprietary 1965 51 93 53% 4561 $29.3b $4.1b $2.2b $17.3b
separately
$5.6b

Prime Buchholz LLC OCIO + other 2011 8% 17 $2.9b $2.8b $74mm

River and Mercantile OCIO + other 2001 27 17 25% 110 $20.6b $19.4b $621mm $424mm $145mm

Russell Investments OCIO + other 1980 94 73 75% 450 $267.6b $91.4b $13.6b $6b $13.2b $143.3b

SECOR Asset Management Implemented consulting 2010 4 11 20% 4 $1b $950mm $50mm

Segal Marco Advisors Implemented consulting 2005 0 3 10% 62 $11.1b $9.3b $328mm $72mm $187mm $1.2b

SEI Investments OCIO + other 1983 68 24 100% 505 $97.2b $54.9b $8b $13.2b $18.6b $2.5b

Spider Management Company OCIO only 2008 2 6 100% 28 $5.1b $5.1b

Not Not Not
Spruceview Capital Partners OCIO + other 2014 1 5 72% 2 $1b $193mm
available available available
$823mm

State Street Global Advisors Proprietary/ non-proprietary 1994 10 63 5% 226 $105.5b $103.2b $24mm $132mm $2.1b

TIFF OCIO only 1991 6 4 100% $7.2b $7.2b

Not
Vanguard Institutional Advisory Svcs Proprietary/ non-proprietary 1997 24 40
available
1203 $54.5b $15.2b $29.8b $8.7b $674mm

Verger Capital Management OCIO only 2014 4 5 100% 8 $1.9b $1.9b

Wespath Proprietary/ non-proprietary 2011 6 4 15% 140 $4.9b $4.9b

Willis Towers Watson* Implemented consulting 1998 160 22 252 $98.2b $68.5b $23.5b $10mm $6.2b

Wilshire OCIO + other 2001 28 7 7% 23 $11.1b $5.3b $4.4b $738mm $399mm $208mm
*For purposes of this survey, Full Discretion is defined as the OCIO manager having full discretion to tactically select and replace ­investment managers without prior client approval; •8 count includes 6 individuals classified as both investment officers
and investment committee members and serving as both "relationship managers" and "portfolio managers" under the definition categories provided in this question. Accordingly, these 6 individuals are presented in both categories above and must
be counted only once to arrive at a total employee count. Angeles has a total of 29 employees as of 12/31/20. †Submitted 12/31/2020 data; ‡Includes salespeople, portfolio managers, research staff and other support staff; §Submitted 9/30/20 data;
||
Does not separately report OCIO revenues. Bank of America Private Bank (“Private Bank”) provides comprehensive wealth management capabilities to a broad base of clients from high-net-worth families to institutional nonprofit organizations. In
2020, the Private Bank revenue was approximately $3.3 billion. As a publicly-traded company, they do not report out any additional breakdown of this revenue. For detailed financial information regarding Bank of America, please see their Bank of
America Corporation Annual Report online at investor.bankofamerica.com; ¶Includes corporate and not-for-profit operating assets; private wealth, VEBA.

Reprinted from ai-cio.com April 2021. ©1989–2021 Chief Investment Officer is owned by ISS. All Rights Reserved. For Internal Use Only—Not For External Distribution.
This document is not to be copied, distributed or reproduced in whole or in part, nor passed to any third party. For information, call (203) 595-3276 or email [email protected].

2021-OCIO-Survey-Reprint_p1FINAL.indd 6 5/4/21 1:03 PM