In the Crowded Outsourced-CIO Market, These Advisors See a Niche
A Payden & Rygel team is leaving to build an institutional advisory arm for Miracle Mile Advisors.
Investment advisory firm Payden & Rygel’s institutional consulting team has left to build an institutional advisory business at another firm that will cater to smaller university endowments, non-profits, foundations, and pension plans.
Gerard Tamparong, Frank Lee, and Michael Treidl, who oversaw $2 billion in assets for large pensions and others for Payden & Rygel, are building an institutional division for Miracle Mile Advisors, an advisory firm that up to now has catered to high-net-worth investors and others.
While Payden & Rygel’s service was aimed at larger institutions, the new service will target organizations with $100 million in assets or less. These smaller investors often can’t meet the minimums or are priced out of competing services, said Lee in an interview.
In many ways, the service will function like an outsourced chief investment officer, or OCIO, which builds investment portfolios for institutions.
OCIOs have become increasingly popular as some big investors, particularly public pension plans, have struggled with the high costs of implementing sophisticated strategies. Investors need to employ experienced staff to find and monitor top asset managers, track costs, and make asset allocation decisions. An outsourced CIO can reduce costs by doing the work on behalf of multiple clients.
But OCIOs have also come under scrutiny over a lack of transparency around their investment results and other issues. For that reason, Tamparong, Lee, and Treidl are leery of that label.
“It looks and smells like an OCIO, but I’m cautious about using that word, as there are many expectations of an OCIO, both positive and negative,” Tamparong said. “There are many issues that clients are thinking about beyond the investment portfolio, including how investment decisions affect scholarships and giving. For a health and welfare trust, for example, we talk to actuaries about the effect on the trust of workers staying in their jobs longer. Rather than OCIO, I like [describing it as] an institutional approach to being a fiduciary.”
Lee explained that the new venture is hoping to bring expertise and other tools to smaller investors that have historically been available only for the largest institutions.