When it comes to getting the most out of their portfolios, larger investors are leaving no rock unturned. Historically, larger institutions handle both the strategy and day-to-day operations of the portfolio with their internal staffs. Now, some may take a second look at ways to make the best use of their resources. In fact, Institutional Investor says that OCIO programs can offer benefits to more organizations than we might think.1
The publication recently highlighted an industry survey showing that only 28% of larger private foundations (with assets over $500 million) have an internal CIO, and only 14% have an internal Investment Committee. Our research mirrors the study. We found that about a third of large ($500 million +) institutions completely handle the investment function internally.2 While the remaining may use a hybrid approach that blends internal staff with a traditional consultant. The study begs the question, "why is there not more in-house infrastructure around the portfolio management function?" The answer is likely that it is very costly and capital intensive, both from a human capital and technology perspective. Can outsourced services that enhance and supplement the internal investment staff help these larger organizations?
Custom outsourcing options
Asset size has been a big deciding factor for those choosing to hire an investment outsourcing partner. Now, some OCIO providers offer custom solutions tailored to all needs and can help even the largest of organizations. Whether it’s leveraging technology for reporting and analytics, access to resources, new and emerging managers, or proactive ideas, partnering with an outsourced provider can bring value that might have been overlooked recently.
Beyond investment management, outsourced partners can provide technology and operating support, data management and improved risk management tools, so the internal investment team has clean multi-asset class data and a robust portfolio analytics engine to drive investment decisions and monitor their portfolio.
For new in-house investment teams, leveraging this type of technology platform immediately scales the operations department, so the focus can be on investing on day one. Because the environment at each institution is so unique, this type of solution must be customizable and scalable to meet the different needs of each organization. SEI has developed this type of capability to help fill the informational void for these larger organizations that could benefit from more investment infrastructure.
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1. “There’s an Untapped Opportunity for OCIOs at Large Private Foundations,” Institutional Investor, institutionalinvestor.com.
2. “Institutional Investor Operational and Due Diligence Survey Results,” SEI, seic.com.
This information is provided by SEI Investments Management Corporation (SIMC), a registered investment adviser and wholly owned subsidiary of SEI Investments Company (SEI). Investing involves risk including possible loss of principal. There can be no assurance that your investment objectives will be achieved nor that risk can be managed successfully.
This material represents an assessment of the market environment at a specific point in time and is not intended to be a forecast of future events, or a guarantee of future results. This information should not be relied upon by the reader as research or investment advice. This information is for educational purposes only and should not be interpreted as legal opinion or advice.