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Financial Health Check: Is Your Organization Ready for an OCIO?

We know how important it is to maintain a healthy lifestyle — exercise, eat a balanced diet, get plenty of rest. The story is similar for endowments, foundations and charitable organizations — your organization needs to maintain its health from both a financial and organizational perspective. “Health” can be evaluated in many ways: community outreach, ability to focus on programming and advancing your mission, grants made, ability of the endowed assets to support the organization or the ability to grow the overall investment portfolio. Monitoring and evaluating overall health through the wellbeing of staff, board and committee members or those you serve may ultimately determine your organization’s ability to achieve its mission.

Assessing the health of your investment program may be the key determinant of the success of your organization both today and in the future. However, investment oversight can be time consuming and complex. Partnering with a trusted investment advisor that shares fiduciary responsibility can allow your organization — no matter the size of its portfolio — to focus on priorities, namely, advancing your organization’s mission. To aid in mission advancement, many organizations hire outsourced chief investment officers (OCIOs) to serve as comprehensive fiduciary partners to provide investment management services such as investment policy development, asset allocation modeling, manager selection, portfolio implementation and rebalancing, financial and performance reporting, and board education.

But making the leap to an OCIO from an arrangement of managing assets in-house or from a consultant model can be daunting. Following are a few questions to ask yourself to determine if the OCIO model can help further advance your organization’s mission and create investment efficiencies for both board and staff.



Does your organization have the internal resources and expertise to manage the portfolio?

If your organization is currently using a self-management or consultant structure, it is likely your board (or investment committee) assumes all investment functions, including developing an investment policy statement, researching and selecting managers, compiling performance reports, monitoring managers and rebalancing the portfolio, not to mention fiduciary responsibility for the portfolio. At the same time, while the board is responsible for investment decisions, in many instances, staff may be responsible for implementation of those decisions and coordination of the reporting. While your board may comprise individuals with diverse backgrounds and strengths, they likely have outside commitments — making time a precious commodity. Further, not all may possess the investment expertise to manage a portfolio in a volatile market environment or have access to diversifying asset classes such as hedge funds or private equity. In periods of significant volatility, such as a bear market, do board members have the capacity to analyze, in a timely manner, manager or asset allocation changes suggested by a consultant or fellow board members and then implement them before the window of opportunity closes?

An OCIO structure can provide a comprehensive solution for an organization lacking the necessary internal resources to successfully manage their investment program in normal or volatile times. Importantly, while self-management on paper seems inexpensive, it is not a “free” path: There could be unexpected costs, such as custody fees, travel expenses, research tools, missed market opportunities and underlying investment costs. An OCIO should be able to provide and implement a quick response to market changes, personalized communications, diligent oversight and efficient, cost-effective delivery of services.



Is your risk management structure sufficient to monitor your portfolio?

Many organizations do not have the risk management structure in place to adequately address risk. These risks could include unforeseen illiquidity in the portfolio, unintended investment exposures (i.e., value vs. growth or large cap vs. small cap) or incorrect geography or currency exposures. There may also be conflicts for those organizations managing portfolios internally. For example, if the person managing the portfolio and selecting funds has a preference toward or personal affiliation with a particular fund provider, that could be perceived as a conflict of interest. Professionalizing your investment management structure in partnership with an OCIO can have the added benefit of mitigating risk, as OCIOs tend to have broader access to risk management tools and frameworks that help ensure that proper due diligence, operational procedures and governance protocols are undertaken. In our experience, it is a risk to not have a risk management structure.

What type of fiduciary oversight do you have in place?

The ultimate aim for fiduciaries is to achieve their return objective at the least cost and with the minimum amount of risk. This involves constructing a cost-efficient portfolio that strives to strike a balance between risk and return and using sophisticated analytical tools to properly align an investment strategy with an institution’s circumstances and core mission. That may be a tall order for a self-managed approach. If you are managing your program internally, your staff is responsible not only for the day-to-day management of your organization’s investment portfolio but also its core operations. You will need to carve out time to set the organization’s strategic direction and ensure the alignment of the investment policy with that direction. Also, the board takes on an added liability by self-managing the investment portfolio. An OCIO helps make decision-making more efficient, simplifies oversight and focuses the attention on each level of investment governance.

What is working with your current approach? What do you want to improve?

Each organization has its own unique goals and objectives. Generally, most organizations want to realize portfolio growth in excess of inflation and spending needs. Growing and protecting assets for the long term is paramount. Can you accomplish your goals with your internal resources only? As mentioned earlier, risk management is extremely important, and utilizing the diversification benefits of less correlated asset classes such as hedge funds and private equity can help navigate a variety of economic and market environments. Partnering with an OCIO should give you a higher probability to grow assets in excess of fees, spending and inflation and provide exposures across asset classes and styles. It also gives you access to a range of investment, governance and operational best practices that can ultimately help your board fulfill its fiduciary duty.

If you are interested in learning more about how you can conduct a financial health check on your organization to determine if it is ready for an OCIO, please contact Samantha Audia, CTFA, at 215-419-6038,, or email

This presentation is intended to be an unconstrained review of matters of possible interest to Glenmede Trust Company clients and friends and is not intended as personalized investment advice. Advice is provided in light of a client’s applicable circumstances and may differ substantially from this presentation. Opinions or projections herein are based on information available at the time of publication and may change thereafter. Information obtained from third-party sources is assumed to be reliable, but accuracy is not guaranteed. Outcomes (including performance) may differ materially from expectations and projections noted herein due to various risks and uncertainties. Any reference to risk management or risk control does not imply that risk can be eliminated. All investments have risk. Clients are encouraged to discuss the applicability of any matter discussed herein with their Glenmede representative.