Pension scheme investors are facing an ever-growing burden of responsibilities, but an outsourced chief investment officer (OCIO) could ease the load and allow trustees to focus on their strategic investment priorities. At a roundtable organised by portfolio institutional, and sponsored by Aon, providers, governance experts and professional trustees, met to discuss the potential of the OCIO model.
From financial market turbulence to sustainability issues and strategic decisions over run-on or buy-out, pension schemes are faced with a full agenda of strategic challenges. The OCIO model offers trustees the option to delegate much of the day-to-day investment execution while dedicating themselves to the bigger picture and strategic priorities.
What is OCIO, and does it mean surrendering control of a portfolio?
Panellists at a portfolio institutional roundtable, including Aon executives Maria Johannessen, Daniel Peters and William Parry, and trustees who have adopted OCIO, agreed that it can be a hard-to-define model, but emphasised that rather than meaning a loss of control, the model allowed trustees to define strategy and focus on those issues where their skills brought the most value.
Crucially several roundtable panellists highlighted the bespoke nature of an OCIO arrangement, with trustees and their provider able to tailor the arrangement, allocating levels of decision-making according to the needs of the schemes and the skills and priorities of the trustees.
The OCIO approach, panellists agreed, was therefore suitable for schemes planning to run-on and for those looking to transfer risk through a buy-in or buy-out, with trustees able to set the target for the investment operation while themselves focusing on the process of risk transfer.
As well as addressing long-term planning, the panellists also debated the role of an OCIO in periods of market turmoil or crisis. The key, according to several panellists, was the relationship and communication between trustees and OCIO and the depth of resources that the OCIO provider could bring to bear.
For one trustee with an OCIO service in place, the gilt market turbulence of late 2022 was over almost before it had begun: “At the time I called my LDI manager and the OCIO had already worked it out.”
Download the full transcript here.