When it comes to managing your organization's investments, you'll likely encounter two main types of service providers: Outsourced Chief Investment Officers (OCIOs) and traditional investment consultants. Both offer valuable investment services, but they operate differently and can serve distinct needs within an organization. Below, we discuss the differences between these two types of service providers and discusses why an organization might choose one over the other.
Traditional investment consultants provide advice and recommendations to organizations regarding their investment portfolios. They assist in various areas, such as strategic asset allocation, manager selection, portfolio analysis, risk management, and performance reporting. However, they typically do not have discretion over the investments; final investment decisions usually remain with the organization's board or investment committee.
Investment consultants are an excellent choice for organizations that wish to retain a high level of control over their investment decisions and have the internal capacity to manage and execute the investment process. These consultants act as advisors, helping organizations make informed decisions and offering expertise to enhance their investment strategies.
OCIOs, on the other hand, take a more active role in managing an organization's investments. They provide similar services to traditional consultants but, crucially, also have discretionary authority (either full or partial) over the investment portfolio. This means they can make and implement investment decisions on the organization's behalf, within the guidelines set out in an Investment Policy Statement.
Choosing an OCIO can be beneficial for organizations that may lack the internal resources or expertise to manage their investments actively. This can be particularly relevant for organizations with complex portfolios, those facing a rapidly changing investment landscape, or those wanting to ensure they have a dedicated, professional team focused on managing their investments.
The decision between an OCIO and a traditional investment consultant depends on several factors, including your organization's resources, capabilities, and investment goals.
If your organization values maintaining control over investment decisions and has the resources to implement these decisions, a traditional investment consultant may be the best fit. They can provide valuable advice and help enhance your organization's existing investment strategy, while leaving final decisions in your hands.
However, if your organization seeks to streamline operations, or if you lack the internal resources or expertise to manage investments actively, an OCIO might be a better choice. By delegating investment decisions to an OCIO, you gain access to a dedicated team of investment professionals who can act swiftly in the best interest of your organization.
Both OCIOs and traditional investment consultants offer unique benefits. The key is to understand your organization's specific needs, resources, and investment goals, and choose the service provider that best aligns with them.