‘Clients Are Kind of Cringing’: Why Insiders Say OCIO Marketing Needs to Change

OCIOs can’t sell themselves on access or outperformance. Here’s what they should do next, consultants say.

Illustration by II

Illustration by II

Outsourced chief investment officer firms once sold themselves on strong performance and access to alternative investments.

But client needs are changing. Private equity’s long lockup periods are no longer attractive, and OCIOs haven’t outperformed, according to industry insiders. Even as client needs morph, some OCIO firms are stuck in their old marketing ways.

Search consultants say that needs to change. Here’s why: A wave of new clients is coming, as an increasing number of institutions are considering hiring OCIO firms, recent research from Cerulli Associates showed.

One search consultant, Brad Alford of Alpha Capital Management, said some of the OCIO firms he works with are still trying to sell themselves on access to hedge funds and private equity firms.

“Clients are kind of cringing,” Alford said, adding that they are worried about being locked into private equity funds for ten or more years, especially when the future is uncertain.


As for hedge funds? “Hedge funds haven’t worked in a long time,” Alford said. “Outflows are huge.”

What’s more, many of these OCIO providers have access to the same firms and funds. Alford said he crosschecks OCIOs to see what kind of funds they can invest with. A lot of them are invested with the same asset managers, he said.

According to Dennis Sugino, who founded OCIO consulting firm Kansa Advisory, OCIO providers used to try to sell themselves on strong performance numbers.

“At any given time, half the OCIOs are going to be underperforming,” Sugino said. “I’m of the impression that OCIOs have over-focused on outperformance in the past because it’s not achievable at all times.”

[II Deep Dive: OCIO Firms Faltered During the First Quarter. But Institutions Still Want to Outsource Investments.]

So what’s an OCIO provider to do?

According to Valter Viola, managing director at Cortex Applied Research, the OCIOs that were able to rebalance portfolios for clients without waiting for approval had a leg up on those with narrower mandates.

“In the last couple of months, the rebalancing policies have been very important,” Viola said. “That could be something they tout.”

According to Sugino, one thing OCIOs could focus on is risk mitigation for clients. Other services like education, or help with fundraising, could also be attractive marketing opportunities, he said.

“I think that going forward that OCIOs are thinking about these other things that they should be doing for the clients,” Sugino said. “The focus on performance was misplaced.”

But it’s not as though potential clients will de-emphasize performance numbers.

“Being a CIO is a like being a coach of a sports team,” Alford said. “They want to see your win-loss record.”