A lot of us love sorting things. It can feel good to bring order to chaos while making comparisons easier. Just look at the popularity of Marie Kondo. The same applies to outsourced Chief Investment Officer, or OCIO, providers. How you sort them matters.
Recently, our founder Anna Dunn Tabke spoke with Cerulli Associates about sorting OCIO providers. We discussed whether it’s fair to think about OCIOs in categories by size of the firm or by type of OCIO. At first glance, size seems like an obvious filter, and I even use it in client conversations. But here’s the problem: GSAM and Mercer are both top-10 OCIOs globally, yet they have very different investment capabilities and firm characteristics. Size alone doesn’t tell the story.
The Scale vs. Specialization Tradeoff
Here’s where my inner MBA comes out: strategy is about choices—and tradeoffs. OCIOs are defined not only by what they do, but what they choose not to do. Think about every consultant’s favorite, tool, the 2×2 matrix. On one axis, you have scale. On the other, you have specialization. Every OCIO business makes a decision about where to play.
Take a boutique outsourced CIO firm with 10 clients and 20 employees.Just knowing the rough size of the firm, an OCIO search consultant like me can start to infer information about their strategy, resources, and focus areas. Clearly, this boutique doesn’t have scale. Even if the firm has 10 multi-billion dollar clients, they are dwarfed in the investment management industry by trillion-dollar-plus players. This boutique may not have the lowest OCIO fees, and they probably can’t negotiate the lowest fees with service providers like asset managers or custodians either. They trade scale for something else, usually, some specialization. Maybe that is access to niche asset classes or strategies where alpha opportunities disappear when large amounts of capital are invested. (A recent example is California Carbon Allowances). Maybe that is high-touch client service, because each employee has a very limited amount of clients to serve.
Now contrast our boutique OCIO with a large financial services firm serving hundreds or even thousands of clients as an OCIO. This OCIO has trillions in assets under management and is set up for scale. Often, relationship managers service dozens of clients with a highly standardized solution. The firm invests in technology like automation, databases, and external systems (and yes, AI) to optimize portfolio solutions for a large number of clients. Neither model is “best.” The right fit depends on a client’s investment objectives, governance structure, and appetite for customization.
Compare OCIO Providers Like a Pro
The OCIO market has matured. Firms have carved out niches and leaned into them. Many bank trust departments, for example, no longer try to act like boutiques. Instead, they emphasize bundled services like custody, lending, and investments in one place. Many offer value-add services like philanthropic consulting. Many OCIOs highlight independence and open architecture, avoiding proprietary products. Some firms specialize in mission-driven investing, while others in delivering solutions to specific client types like healthcare OCIO services. Some OCIOs only offer the endowment model. The strategic choices these fiduciary investment advisors make to compete end up shaping the client experience and the investment portfolio a client receives.
When Leita runs an OCIO search process, we’re not just comparing fees or past performance. We’re asking questions that truly differentiate OCIO providers, like:
Much of the data we receive in an OCIO market evaluation process is backward-looking. That’s always the challenge with investing. But understanding a provider’s philosophy—how they approach asset allocation, investment strategy, and governance—can tell you a lot about future alignment with the nonprofit organizations and plan sponsors we consult to.
The Takeaway
Comparing OCIO providers isn’t about finding the single “best” firm. It’s about finding the right fit for your governance model, resources, and goals. That means looking beyond size, costs, and returns to understand tradeoffs—scale versus specialization, bundled services versus singular focus, in-house versus outsourced investment teams.
The pros and cons of each OCIO model matter. So do potential conflicts of interest, fee structures, and how well the provider’s investment strategy aligns with your objectives. Sorting OCIOs thoughtfully is the first step toward building an investment portfolio that works for you.
Ready to Sort Out the OCIO Market?
Leita Advisory helps investment committees compare OCIO providers with clarity and confidence. Contact us to learn more.
