Institutional investors are eager to utilize the services of outsourced chief investment officers, but the market is not growing as quickly as anticipated, according to a new report from investment consultant NEPC.
The report of the NEPC 2022 Governance Survey released on Thursday shows that among the 247 asset owner respondents that participated, 12% says their most "trusted" investment consultant provides OCIO-like services, which is down from 13% in the most recent survey conducted in 2018. In that 2018 survey, however, an additional 15% of respondents said they expected their current consultant to ascend to an OCIO role in the next five to seven years (between 2023 and 2025).
For the current survey, 17% expect their current consultant to provide OCIO services in the next five to seven years.
"As investment programs have grown over the past several years, we've also seen firsthand the increased desire and need for ways to streamline management and operational functions," said Steve Charlton, partner and head of client solutions at NEPC, in a news release announcing the survey results. "There are often good reasons to maintain trusted advisory relationships, which has slowed the overall progression to OCIO. Some clients look to maintain decision-making responsibility or hand off only portions of the governance process, whereas others have decided to move entirely to OCIO. We believe advisory and OCIO can co-exist within our firm and intend to provide the best services consistent with our clients' objectives."
The OCIO market is most prevalent at foundations and endowments. Among respondents at those types of institutions, 26% said their consultant provided OCIO services, and 32% said they anticipate their consultant will perform that role in the next five to seven years. Those numbers are up from 20% and 23%, respectively, from the 2018 survey.
