Why Now Is the Right Time to Evaluate Your OCIO

Selecting an investment partner that aligns with your organizational mission and vision can be challenging but knowing when to reconsider that relationship may be even more difficult. The needs of most non-profits will evolve over time, so regardless of your satisfaction level with your current provider, it is a prudent practice to regularly evaluate your investment advisor, and for some, it may be a fiduciary requirement.


Often when a non-profit institution is considering an investment partner, the first factor is past performance. Due to the nature of outsourced chief investment officers (OCIOs), unless a firm is compliant with certain standards like GIPS, there are no comprehensive industry benchmarks for measuring performance or other evaluation criteria. Additionally, the search and evaluation process itself is often complicated and inefficient, which may lead non-profits to select or retain a misaligned partner. With so much variability in evaluation methods, how is an institution to know which partner is best for them or when may be the right time for a change? This article will explore how non-profit organizations can evaluate their partners, and when it may be time to find a new one.


Evaluating Your Non-Profit’s Investment Partner – Start with the Right Questions


Typically, investment managers are assessed by employing the four Ps: people, process, portfolio, and performance. This traditional approach may work when selecting individual managers but is less effective in assessing candidates to manage your entire portfolio. Simply relying on these four factors may result in a subpar selection for your institution’s investment management partner. The four Ps fail to address more subtle, intangible considerations that are imperative for non-profit organizations when evaluating a true, fiduciary partner. The following are our recommendations for questions to ask your OCIO that delve more deeply than what may appear in a standard review.

How can your investment advisor support and advance your mission?

As an extension of the organization, service providers become stewards of the institution’s purpose. An investment partner should make the non-profit’s goals and mission central to its own purpose and empower the organization to reach its aspirations. Not only should an OCIO oversee your investment portfolio, but they should also seamlessly integrate as a member of your team, assisting with other tasks like new board member education, donor communications, and operational needs. Your OCIO should engage with the organization’s staff and Board at a minimum, but also seek to serve the broader community of your constituents.


Is your non-profit positioned for long-term success? In an industry lacking commonly accepted evaluation metrics, performance reports may be more difficult to interpret than they seem. Because a non-profit’s endowment has a perpetual time horizon, volatility can have long-term unforeseen effects. For this reason, it is crucial for a non-profit to choose a partner that promotes sustained, stable, risk-adjusted returns in perpetuity. In addition, they should be available to discuss risk, provide additional analyses as needed, and understand the context in which the organization and its endowment are operating.

Does your investment advisor specialize in OCIO services?

Many firms have identified the proliferation of the OCIO model, especially in the non-profit space, as an opportunity to enter the market and create their own iteration of this service. However, while the firm may have extensive investment management experience, the OCIO model includes nuance the advisor may not have had to navigate previously. Firms that have recently begun offering OCIO services may not have experience in managing fully discretionary portfolios or have the ability to properly allocate resources across multiple lines of business. A comprehensive OCIO strategy requires significant risk management, expertise in a broad spectrum of investment strategies, and the necessary infrastructure to execute the appropriate investment strategy with full accountability. Service providers that have recently entered the space may be lacking in operational structure, experience, or talent to excel as the full-time, fiduciary partner that the OCIO model requires.

What is their experience as a discretionary provider? 

Acting as a discretionary investment manager carries much more complexity and accountability than a standard consulting relationship. It is critical to understand a firm’s experience and expertise in the discretionary OCIO sphere. What is the tenure and background of the investment team? Does the firm have a history of serving non-profits on a discretionary basis? Who are their clients? As previously discussed, evaluating non-profit investment management providers can be complex. The length and depth of their experience in a discretionary capacity should be considered. If a firm has little history in this realm, it may further complicate evaluation and make it more difficult to make a direct comparison with other providers. Experience matters, so partnering with an OCIO that has a proven track record of success and a history of serving non-profits on a discretionary basis is critical.

Know When to Expect More

Knowing when to engage with providers and explore available options requires an understanding of the fundamental goal of hiring an OCIO – to shift the fiduciary oversight and management of the investment portfolio to a third party, which enables an institution’s staff and board to focus their time and effort on additional responsibilities. While an institution may be comfortable with its provider, the responsibility of a non-profit organization is to always serve its constituents. Since most non-profits are intended to exist in perpetuity, they must keep their eyes on the horizon, frequently evaluating their needs and identifying where changes may be necessary. A successful OCIO relationship should protect an institution’s corpus and deliver performance that can provide for the non-profit’s mission in perpetuity while holistically serving the organization’s needs.

Non-profits are complex organizations with constantly evolving needs, and service provider relationships must evolve with them. As the OCIO landscape matures and the firms and services on offer grow, it is important to regularly evaluate your investment partner to ensure they remain the best fit for your organization. If your organization has been handling duties for which your OCIO should be responsible, if your investment partner is ill-equipped to provide counsel and guidance in emerging areas such as ESG, or if they don’t comply with Global Investment Performance Standards (GIPS), then it might be time to consider whether there is a firm that can better serve your mission and goals.

If you’ve found this information helpful and believe it may be beneficial to explore your options, please refer to our OCIO RFP template as a starting point.

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