IF USING AN OCIO, YOU NEED A MONITOR
Institutional investors hire Outsourced Chief Investment Officers (OCIO) for fiduciary protection, faster execution and better returns. Many have reasoned that their lack of expertise in complex financial markets, strategies and products means they should leave such decisions to the experts.
But hiring an OCIO does not relieve investors of their duty to monitor. In fact, since they are no longer part of the decision process, monitoring becomes more difficult. An independent monitor is the prudent path as it brings greater accountability to balance the OCIO's greater authority. Plus, investors under ERISA will gain a layer of legal protection following Tibble v. Edison and Hughes v. Northwestern.
Finally, OCIOs serve as both player and scorekeeper. Their performance reports contain incomplete feedback loops making it difficult to determine their value-add. Worse, some OCIOs use hard-to-detect techniques making their performance appear better. A monitor brings transparency and accountability to the process.
This short video highlights the reasons for and benefits of an independent review.
SERVICES
OCIO Monitor's suite of services are offered on both a one-time and ongoing basis to every type of institutional asset owner.
DUE DILIGENCE REVIEW: This comprehensive review examines every aspect of an OCIO's duties to objectively & quantitatively evaluate value-add. Not only will the asset owner have performed their duty to monitor, but the OCIO will gain valuable insights to improve future outcomes.
HEALTH & WELFARE REVIEW: Although such plans are normally not "return oriented," they still require monitoring and due diligence. Similar to the review above, this service is more streamlined but still brings many of the same benefits but at a lower cost.
PERFORMANCE PRESENTATION REVIEW: Many OCIOs (and investment consultants) have authority to craft their own benchmarks when presenting both manager and total plan performance. Many take advantage and create custom benchmarks that under-measure beta creating the appearance of outperformance. A performance presentation review will ensure benchmarking practices are fair, accurate and unbiased.
PEER FEE & PERFORMANCE REVIEW: This high-level evaluation provides asset owners a level of due diligence primarily examining the nexus of fees in light of performance. Fee compression in recent years are leading asset owners to more frequently reconsider their OCIO fees and contracts.
ABOUT US
Brian A. Schroeder, MSc-FAIM Brian has over 30 years of investment experience, as both an institutional manager and consultant. He founded OCIO Monitor to be the first objective and unbiased due diligence provider on behalf of institutional asset owners. He has worked for pensions, foundations and endowments with assets up to $15 billion. He has been consulted by academics and presented in 2022 to the Securities Exchange Commission’s Division of Exams’ investigators on how to spot performance reporting fraud when conducting routine firm inspections. Schroeder has spoken at the International Foundation’s Trustee Masters Program, the Investments Institute and the ISCEBS Symposium. In July 2014, Benefits Magazine published his article “Multi-balanced Model: The Missing Link in Investment Approaches?” and, in May 2019, “3 Simple Strategies for Adopting a Passive Investment Consulting Approach” and, in July 2020, “Investing in Response to the Covid-19 Response.” Schroeder has a bachelor of arts degree in economics and a master of science degree in financial analysis. He served for 3 years on the Riverton, Utah Committee for Economic Development and is a volunteer at the Salt Lake City YWCA.
Thomas C. Donahoe, BSFS, MA, MBA, JD, FRM Tom previously served as Chief Risk Officer at two major Hedge Funds as well as senior risk management roles at Barclays Capital and RBC, NY. He has served as CEO and CIO of two Private Foundations. He also managed the derivatives hedging program for MetLife. Earlier in his career, Mr. Donahoe managed sales and trading staffs as well as advising on the proper use of financial derivatives for large US corporations. He worked for international banks in Toronto, Zurich, and Vienna. Tom led the OCIO search and governance practice at Manager Analysis LLC. He assisted Endowments and Foundations in creating process efficiencies, investment discipline, and achieving cost savings. Tom wrote chapters on Compliance Risk and Documentation Risk in the Professional Risk Handbook. Mr. Donahoe has written 30+ papers on all aspects of Investment Management, Compliance, OCIO selection, and Governance. Mr. Donahoe serves(ed) as a Trustee for 7 NYC-area Foundations over the last 20 years. He earned his BSFS from Georgetown University. He also studied international economics at the University of Freiburg.
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