Outsourcing Investment Management: Relief for Overburdened CFOs

Stephen Morgan, September 1, 2020

If you are a senior financial officer charged with the oversight of an investment portfolio but don’t have the time or expertise to devote to it, there’s a solution you may want to consider. It’s called OCIO, which stands for “outsourced chief investment officer.”

OCIO also goes by names such as “implemented consulting,” “discretionary consulting,” “delegated consulting” and “delegated investing.” Regardless of what you call it, the strategy is the same: Your organization outsources discretionary investment management to a trusted third party.

 

What do you get with an OCIO?

An OCIO provider can help your organization develop an overall strategy for the management of your investments, as well as implement specific aspects of that strategy. Services can include: working with the client to establish risk tolerance, formulating investment policy, selecting investment managers, implementing portfolio decisions (both strategic and tactical), providing ongoing oversight and performing risk management duties.

Additionally, advisors with OCIO experience can educate organizational leaders — board members, trustees and senior management responsible for oversight of the investment portfolio — on an ongoing basis about markets, investing and meeting fiduciary obligations.

 

Outsourced Chief Investment Officer

 

Who should consider using OCIO services?

Very few organizations have a dedicated chief investment officer on staff. That leaves CFOs and other executive managers to take on investment duties themselves. But often there just aren’t enough hours in the day for senior financial executives to manage those duties — or, in some cases, it’s just not their forte. If that’s the case at your organization, OCIO is an option to evaluate.

Organizations with as little as $1 million in investable intermediate and/or long-term assets may be able to benefit. Common OCIO users include foundations, endowments, not-for-profits, municipalities and pension/retirement plans. Hospitals and insurance companies are among the for-profit corporate entities that use these services.


What are some of the benefits of this strategy?

With an OCIO, your organization’s staff, committees and board can leverage the skill and expertise of an on-call investment office without the administrative burden and expense of an on-site investment staff. Delegated investing can improve results with respect to efficiency, meeting fiduciary responsibilities, enhancing performance, lowering costs and risk management.

 

Is OCIO a new phenomenon?

No, it’s been offered for many years but has really only emerged under the “OCIO” name in the last decade or so.

 

Who offers OCIO services?

Banks with the necessary size as well as investment and institutional trust capabilities, investment consultants with discretionary arms, and large investment advisors and brokerage firms.

 

What should you look for in an OCIO provider?

Some OCIO providers only want clients with hundreds of millions of dollars in investable assets. If that doesn’t describe your organization, be sure the provider is willing to give you the time and level of service you need. In addition, make sure the firm has experience dealing with institutional OCIO type arrangements and fully understands the related fiduciary and corporate obligations. And, finally, look at any complementary services the OCIO can provide; for example, there can be synergies working with a bank and having coordinated discussions around credit, cash flow and other treasury issues.

Hancock Whitney performs the OCIO function for many of its Institutional Trust clients. To learn more, contact the Trust Department at 800-651-9227.

 

Hancock Whitney Bank offers investment products and services, including outsourced chief investment officer services and asset management accounts, as part of its Wealth Management services. Hancock Whitney Bank is a wholly owned subsidiary of Hancock Whitney Corporation.

The information, views, opinions, and positions expressed by the author(s), presenter(s) and/or presented in the article are those of the author or individual who made the statement and do not necessarily reflect the policies, views, opinions, and positions of Hancock Whitney Bank. Hancock Whitney Bank makes no representations as to the accuracy, completeness, timeliness, suitability, or validity of any information presented. This information is general in nature and is provided for educational purposes only. Information provided and statements made should not be relied on or interpreted as accounting, financial planning, investment, legal, or tax advice.  Hancock Whitney Bank encourages you to consult a professional for advice applicable to your specific situation.
 
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