Evaluating OCIOS: The Search Consultants’ Perspective
Chestnut Advisory Group
Chestnut is a boutique management strategy consultant dedicated to asset managers and solutions providers.
The Chestnut Solutions Institute is an independent research forum designed to help the solutions industry establish and promote strong standards and norms. Last week the Institute hosted a public webinar as part of the Institute’s mission to educate all stakeholders - investors, asset managers, investment solutions providers and their partners - about the capabilities and benefits of investment solutions.?
Last week the Institute hosted a well-attended public webinar, Evaluating OCIOs-The Search Consultant’s Perspective, covering important topics that frequently arise when going through the OCIO search and evaluation process.? Moderator Amanda Tepper, Managing Partner at Chestnut Advisory Group, along with the expert panel consisting of Brad Alford, Founder of Alpha Capital Management, Larry Coats, President and CEO of Clearview Fiduciary Alliance, and Greg Metzger, Senior Consultant and Practice Leader at North Pier Search Consulting discussed several pressing issues facing investors seeking to review or hire an OCIO, including:
OCIO Providers, Models, and Conflicts
One important topic covered was ‘OCIO Providers, Models, and Conflicts’.? Larry Coats inserted valuable insight to the conversation, explaining that although some OCIOs claim otherwise, his experience is that very few OCIO models are actually void of conflict.?
“The question is whether they acknowledge the potential conflicts that exist in their models and whether they’re transparent with their clients and prospective clients about those conflicts and potential conflicts,” said Coats.
Coats added that, “Getting an [OCIO] firm to acknowledge their conflicts and/or potential conflicts speaks as much as anything to the level of integrity in the firm.”
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OCIO Search Evaluation: A Wide Range of Criteria
Brad Alford described Alpha’s criteria for evaluating an OCIO, adding, “Some other things we look at are conflicts of interest. The OCIO model is the most conflicted model we’ve ever seen.”
According to Alford, two key points usually take precedent in an OCIO search. “What always bubbles to the top in an OCIO search is track record is usually number one and investment philosophy and process is almost always number two,” said Alford.
OCIO Operating Capabilities
Greg Metzger mentioned a number necessary components when evaluating an OCIO’s operating capabilities. “When you’re hiring an OCIO, you’re hiring someone to manage your money, not just to advise you on it,” said Metzger. ? He noted that each OCIO provider offers a different set of these crucial operating capabilities, such as custody, trading and reporting.? Some OCIOs have deep in-house operating capabilities, while others outsource most or all of these capabilities to other providers, and are often open to working with a client’s operating providers of choice.
To watch a replay of this thorough review and explanation of the OCIO world and navigating the process of evaluating OCIOs, please visit https://chestnutadvisory.com/evaluatingociowebinar/