Around 1 in 4 US institutional asset owners expect to use an OCIO over next 24 months

Written by Adam Cadle

25/01/2023

About one out of four US institutional asset owners expect to use an outsourced chief investment officer (OCIO) in some capacity over the next 24 months, according to Cerulli’s latest research.

Around 14% of asset owners expect to begin using an OCIO relationship and 11% expect to expand the use of OCIO, moving from a partial portfolio (sleeve) to a total portfolio mandate or the addition of other asset pools that are currently managed in-house. Cerulli said many institutions could also move from partial discretion to a model in which discretion is fully ceded to the OCIO provider. Just 6% expect to reduce or stop using OCIO services.

In the next 24 months, US asset owners are expected to increase allocations to emerging markets debt, private debt, infrastructure, and various real estate investments – a key driver for OCIO adoption.

In addition to experience managing alternative asset classes, Cerulli said key services that asset owners will seek from OCIO providers include risk analytics, bundled plan administration, and online portal access.

“Asset owners want access to how their investments are performing at their fingertips. OCIO providers that can offer granular transparency with anytime, anywhere access to investment performance will be well positioned to win mandates,” Cerulli associate director Laura Levesque said.

An OCIO provider’s ability to retain client assets will increasingly depend on the firm’s conviction in sticking to its original mandate, Cerulli added.

“Deviating from the original mandate is by far most likely to contribute to a client’s decision to terminate a relationship. Underperformance is also considered a major factor, but at a much lower level (78% vs. 35%).”

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