More than a quarter (26 per cent) of institutional asset owners expect to use an outsourced chief investment officer in an increased capacity during the next two years, according to a new survey by Cerulli Associates.
The survey found 14 per cent of respondents said they’re seeking to establish an OCIO relationship over the next two years, while 11 per cent said they expect to expand their use of OCIOs. About six per cent of respondents indicated they expect to reduce or end their reliance on OCIOs during the period.
“Amidst inflation, interest rate hikes, market volatility and the changing implications of geopolitical conditions, asset owners are increasingly drawn to the OCIO model for the management of sleeves for alternatives and private asset classes for which they do not think they have the appropriate level of expertise,” said Laura Levesque, associate director at Cerulli, in a press release. “Given market conditions, these asset allocation trends are in line with what Cerulli would expect — all four asset classes provide some level of diversification from other public market investments.”
Read: Assets managed by U.S. OCIOs to exceed US$2.7 trillion by 2022: research
In terms of the OCIO services most frequently sought by institutional investors, survey respondents cited risk analytics, bundled plan administration and online portal access. Interest in providing online portal administration services also increased among OCIOs.
Among OCIO respondents, 58 per cent reported providing online portal administration services while 37 per cent said they’re considering offering it. While 53 per cent currently offer regulatory advice to clients, just 11 per cent indicated they’re considering doing so.
Among asset owners, three-quarters said they’d sever an existing relationship with an OCIO as a result of deviation from their portfolio mandate. And about a third (35 per cent) said they’d cut ties with an OCIO due to underperformance. “The upcoming wave of clients will want to make certain that they understand the manner in which the OCIO operates and its investment philosophy,” said Levesque. “Therefore, a firm’s ability to convey these attributes to asset owners cannot be understated.”
Read: New ideas, access to top asset managers top reasons institutional investors hire OCIO: survey