The outsourced chief investment officer market could be reaching its natural maturity, according to a new survey by Cerulli Associates Inc.

Globally, OCIO assets under management nearly reached US$2 trillion at the end of 2018. While the U.S. experienced 7.8 per cent growth over the past year, the report noted growth may prove more modest in the coming years.

In looking at new avenues of growth, it found OCIOs will have to take on new practices around performance reporting, as well as leveraging relationships with search consultants and broadening the geography of potential opportunities.

Read: Head to head: Is there a place for OCIOs in DC pension plans?

As the market grows, increasing competition has also put pressure on OCIO fees as investors become more aware of their various options, the report found. Indeed, competition (57 per cent) and fee comparison between peers (43 per cent) were the top ranked challenges faced by OCIO providers. And nearly three-quarters (72 per cent) of OCIOs said they’ve reduced their published fee schedules over the past three years.

“The resulting economies of scale for the larger players make it easier for them to lower fees [and], as a result, smaller players need to come to the table with a competitive value proposition,” said Laura Levesque, senior analyst at Cerulli, in a press release.

Another key component of the market is consultants helping asset owners search for the right OCIO, with 66 per cent of those surveyed saying they own at least one mandate through such search channels. “The customized nature of the industry and the lack of regulations can make comparisons between firms difficult,” said Levesque. “Search consultants are driving methodology and standardization. Providers should expect even greater future interaction.” 

Read: The Wawanesa Mutual Insurance Co. pension plan’s OCIO journey

Copyright © 2021 Transcontinental Media G.P. Originally published on

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