Outsourced Chief Investment Officer (OCIO) is one of the fastest growing areas of investment management. Charles Skorina, publisher of The Skorina Letter and the acknowledged expert on tracking growth within the OCIO marketplace, recently published a list of 103 firms who claim to be delivering OCIO services. When one considers what is required to deliver the benefits of OCIO, that is an independent investment office and your own Chief Investment Officer capability, the vast majority of those firms do not measure up. A real OCIO search begins by eliminating pretenders from consideration.

EXECUTIVE SUMMARY

• Traditional investment governance has been challenged by a tipping point of complexity and noise brought on by globalization and investment product innovation. Consequently, Wall Street’s buyer beware social contract is long past its expiration date when it comes to serious investors with serious responsibilities.

• The advantages of a sophisticated, conflict-free independent investment office with multibillion-dollar access are undeniable. Decades ago, in order to deal with that tipping point of complexity and noise, sophisticated, multibillion-dollar investors like the R.K. Mellon Foundation and Yale University developed their own, independent investment offices led by a carefully selected, highly qualified C-suite executive called a Chief Investment Officer.

• Outsourced Chief Investment Officer (OCIO) is an important, cost-effective innovation that, when executed well, can deliver the advantages of a sophisticated, conflict-free, multibillion-dollar, independent investment office and transform Wall Street’s archaic buyer-beware social contract into one of trust, collaboration and reliable success.

• Confusion created by widespread misuse of the term “OCIO” threatens to derail its transformative power. Growth in OCIO has attracted banks, traditional investment-product firms, consultants and start-ups who claim they too can provide OCIO services, despite structural conflicts of interest and cultural mismatches that disqualify them.

• Three requirements eliminate 75% of the Skorina list leaving approximately 25 true OCIO firms for in-depth consideration. When selecting an OCIO (or building an independent, internal investment office) wise investors will require a conflict-free structure, capability that is unconstrained by purchasing power and a point-accountable, investment-management culture.

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