One of the most common hesitations I hear when evaluating if OCIO is the right model is:
“If we delegate investment decisions, what is left for us to do?”
For boards that have never operated in a delegated investment model, whether endowments, foundations, healthcare entities, or family offices, relinquishing decision authority can feel uncomfortable for Investment Committees used to reviewing managers, approving allocations, and offering expert perspective at quarterly meetings. Moving to a decision-making model in which the OCIO has authority over both decision-making and execution can feel like giving up control.
But delegation does not mean disengagement, and it doesn’t absolve Committees of the fiduciary duty to monitor. Long-term portfolios benefit from strategic oversight and big-picture decisions as much as day-to-day tweaks and implementation. Committees that spend too much time in meetings making small tweaks sometimes lose sight of larger strategic decisions. An OCIO model can help organizations use limited Committee time to great effect, delegating decisions that require constant monitoring (such as rebalancing) or in-depth due diligence (such as manager selection), while leveraging Investment Committee members’ perspectives to set an investment strategy that meets the organization’s needs.
In practice, Committees should recognize that OCIO is not an all-or-nothing proposition. Committees can initially delegate one or two functions, allowing the governance structure to adapt naturally over time as the Committee builds confidence in the OCIO’s decision-making.
Many organizations are comfortable delegating rebalancing first. The OCIO is responsible for monitoring the portfolio on an ongoing basis, outside of quarterly meetings. In market corrections or run-ups, the OCIO is well-positioned to identify the need for rebalancing and act on it. Since rebalancing ranges are clearly stated in the Investment Policy Statement, many Committees are comfortable with the OCIO acting in accordance with the policy.
Another common decision that is delegated to the OCIO is manager selection. Most committees do not have the time for due diligence on managers or the depth of knowledge to form independent opinions on managers across all asset classes. Meanwhile, OCIOs have departments full of people for whom manager due diligence is a full-time job. Delegating manager selection alone can better match the time and talents of Investment Committees with their role. From there, the partnership can evolve based on comfort and trust.
It is also possible to separate investment decision-making from operational execution. A well-designed OCIO service model allows the board to retain strategic oversight of risk tolerance, spending policy, long-term objectives, and even manager selection while delegating day-to-day execution, such as trading and paperwork that would otherwise fall to the Chief Financial Officer or a member of the finance team.
Different organizations start from different places. Some want full discretion and streamlined execution. Others prefer a mix-and-match approach, retaining discretion over certain strategic decisions while outsourcing others to an OCIO.
The most successful OCIO partnerships are those in which roles and responsibilities are well-defined and align with the organization’s comfort level at the outset, and are then adjusted thoughtfully over time.
