Who Should Read This
- Investment committee members, nonprofit executives and fiduciaries, and finance staff members tasked with evaluating, selecting, or overseeing an outsourced Chief Investment Officer (OCIO) relationship
Key Takeaways
- Strong performance often masks misalignment, but when returns soften, behavioral dynamics are critical
- You can’t fully understand an OCIO firm through an RFP. The tool is too blunt for the nuance that fit requires.
- Behavioral dynamics — like communication style, responsiveness, and philosophical alignment — play a defining role in long-term success.
- Clients don’t just need a technically competent OCIO — they need a true investment partner.
- A stronger OCIO relationship starts with a better selection process: one that centers trust, fit, and long-term value.
Why the OCIO Search Process Needs a Relationship-Centered Refresh
In the past few months, Leita has sat down with over 50 outsourced Chief Investment Officer (“OCIO”) firms, from boutiques and mid-sized firms to the largest providers in the OCIO industry. We’ve also spoken with investment committee members, nonprofit executives, and investment managers. We wanted to learn what peers in the industry think it takes to build institutional investment relationships that deliver long-term value.
Even though Leita Advisory is a new firm, our founder is not new to this work. We launched Leita by listening and conducting on-the-ground research to shape a modernized OCIO search process. Our clients want to hire an OCIO partner for 10+ years – so, what does it take to build a relationship that goes the distance? We have our opinion, but we wanted to hear from other experts too. There’s a common industry refrain: clients leave because of poor performance. But in our experience, that’s only part of the story. What we learned from peers wasn’t surprising, but it was clarifying (and more nuanced): good performance forgives a lot of friction. Communication issues, unclear reporting, or philosophical differences in an investment adviser may be tolerated (or overlooked entirely) when numbers are strong. But once performance softens, those underlying tensions start to surface. Even in our quantitative, results-driven field, soft skills still matter. Quite a lot, in fact.
Behavioral Dynamics
Now, the investment industry tends to have a knee-jerk reaction to “soft skills.” After all, we’re in the business of making money for our clients. That’s a measurable number, and therefore, we should be rigorous in our measurement. Of course that’s true. But hear us out. Just like Kahneman and Tversky showed the industry that behavioral economics matter as much as actual economics, we at Leita believe that behavioral dynamics underpin the most successful long-term investment relationships. So we’re rebranding soft skills to behavioral dynamics. Behavioral dynamics — that is, communication style, listening ability, philosophical alignment —are hard to assess in an RFP and score with a spreadsheet. But over a 10- or 15-year partnership, they matter nearly as much as performance.
OCIO RFPs tend to measure what’s easy to count: the number of manager meetings, the size of the research team, the assets under management, and number of CFA charterholders. But here’s the truth: there’s little evidence that any of those metrics directly predict portfolio outperformance (net of all fees, of course), let alone help non-profits select the right OCIO. Even the best OCIO providers may experience short-term performance dips – it’s inevitable. So what keeps clients from walking away? Trust. Respect. Shared understanding. Working with an OCIO that is a true partner, not just a vendor. In other words, behavioral dynamics.
There is a real cost of overlooking fit during a search. Turning over an endowment or foundation portfolio invested for the long-term is no small task. Transitions can take a year, between revisions to the Investment Policy Statement, asset allocation modeling and selection, and manager changes. Both explicit costs (search firm fees, transition management, trading fees, excise taxes) and implicit costs (time, donor uncertainty) make transitions expensive. And when that time, energy, and money doesn’t serve to create a stronger relationship moving forward, no one wants to do it all over again.
The OCIO search process doesn’t need to be scrapped. But it does need to evolve — to surface and evaluate the right information that sets clients up for long-term success.
Beyond Table Stakes: It Takes More than an RFP to Find the Right OCIO
To be clear: OCIO firms are different — and sometimes, those differences matter a great deal. Sometimes clients simply outgrow their investment partner. Some need deeper private markets expertise. Others require more sophisticated liquidity forecasting or investment options. Some OCIOs don’t even accept fiduciary responsibility, something that Leita considers a hard requirement. Clients like these need to move to a different caliber of OCIO provider; the costs are worth it. But once you’ve identified suitable OCIO providers operating in the right “neighborhood” — firms with strong qualifications, comparable client bases, operational support, and institutional investment strategy — the distinctions between the best OCIO providers start to narrow.
If your Committee is comparing three SEC-registered boutiques, all of which offer high-touch service and robust private markets capabilities, how do you choose?
A Request for Proposal (“RFP”) is an efficient way to establish baseline qualifications (in other words, table stakes). It clarifies firm structure, resources, and capabilities. A well-written OCIO RFP clearly outlines the OCIO service model and showcases investment process and asset class expertise. The RFP is a helpful due diligence tool that can surface conflicts of interest, dig into past performance, and evaluate the use of proprietary products.
Once the basics are covered, the real work begins: evaluating communication style, philosophical alignment, risk management, and long-term partnership potential. That’s where stronger long-term investment relationships are forged. The true value of a search consultant like Leita Advisory isn’t in tallying who has the most manager researchers or quarterly calls — it’s in helping fiduciaries move past what’s easy to measure and focus on what really matters.
Leita’s Top 5 Tips to Hire an OCIO for 10+ Years
You can’t fully understand an OCIO firm through an RFP. The tool is too blunt for the nuance that assessing fit requires.
So how do you do it? The search firm or you (preferably both) need to spend less time processing data and more time evaluating behavioral dynamics. This is easier if you have a search firm, of course, to handle the heavy lifting. If your Investment Committee is going it alone, we recommend forming a search committee to oversee the process and manage the data analysis before bringing it back to the full Committee.
Here are Leita Advisory’s top 5 tips for firms seeking to hire an OCIO that will last for 10+ years:
- Clarify your organization’s wants and needs first. What are must-haves, and what are you willing to compromise to get those?
- Efficiently establish the table stakes and move on quickly.
- Meet teams early, and get a sense for culture, investment philosophy, and relationship management before investing time on a deep dive.
- Due diligence only the most qualified firms, and focus that due diligence on the core capabilities that matter most to your organization
- Try to set up a final interview that allows your OCIO to be their real selves, replacing sales pitches and formal presentations with working sessions designed to evaluate behavioral dynamics and investment skills.
We couldn’t resist, so here’s a bonus tip: give the OCIOs enough information to evaluate your organization too. Fit goes both ways, and OCIOs can put together more thoughtful, customized information if they have some basic information on you (like Investment Policy Statement, current asset allocation, liquidity needs, communication style, and investment philosophy).
Technical Skills Open Doors — Fit Builds Long-Term Value
There’s no question that technical competence matters. OCIO firms need the right capabilities and resources to serve institutional clients well, and they need to back it up with strong track records of success. But what drives long-term value in an OCIO relationship isn’t just what gets measured in quarterly reports. It’s what shows up in the relationship: trust, communication, shared understanding, and partnership. Behavioral dynamics may not be easy to score, but they’re often what separates a functional relationship from a lasting one. And they deserve more space in the OCIO selection process.
Let’s Talk
If you’re rethinking your OCIO search lens — or planning a project in the year ahead — let’s talk. A stronger OCIO relationship starts here.
