Expertise on Demand: Leveraging OCIOs for Advanced Investment Strategies

Expertise on Demand: Leveraging OCIOs for Advanced Investment Strategies

Investment options have significantly evolved over the past few decades and show no signs of slowing down. As markets grow increasingly complex and new asset classes and sophisticated investment strategies emerge, many RIAs agree that striving to keep up with all these advancements is challenging. 

This is where an Outsourced Chief Investment Officer (OCIO) can provide your RIA firm with “Expertise on Demand” for advanced investment strategies. Firms like Cornerstone Portfolio Research can empower you to offer clients a more comprehensive range of sophisticated investment options.

In this blog, we discuss the advantages of an OCIO and how they can leverage your time, resources, and expertise when considering advanced investment strategies for clients.

The Expertise Advantage of an OCIO

OCIOs employ a team of highly educated investment professionals who bring extensive experience across a range of asset classes and strategies. Some of the specific areas of expertise that OCIOs can offer include:

  • Alternative investments: Investments like private equity, real estate, and hedge funds can offer potential advantages for your clients, such as diversification, potentially higher returns, and a hedge against inflation. OCIOs can assist RIAs in navigating alternative investments by offering expertise in portfolio construction and implementation.
  • ESG investing: It’s not uncommon for clients to express interest in aligning their investments with their values. ESG investing focuses on incorporating environmental, social, and governance factors into the investment decision-making processes. OCIOs can help you develop and implement ESG investment strategies.
  • Socially Responsible Investing (SRI): SRI is a type of ESG investing focusing on social factors, such as labor practices, animal welfare, community impact, and health and safety. OCIOs can help you screen investments according to your client’s social responsibility criteria.
  • Complex portfolio construction and optimization techniques: Creating and managing well-diversified portfolios that align with each client’s risk tolerance and investment goal is challenging. OCIOs can help RIAs by employing sophisticated techniques like risk parity, factor investing, dynamic rebalancing, derivative strategies, and quantitative analysis to manage and optimize portfolios.

An OCIO’s expertise in these areas is particularly valuable for RIAs, because it frees up your time to focus on client relationships without needing an in-house investment team of analysts and portfolio managers.

Leveraging Expertise for Client Needs

As an RIA, you deeply understand your client’s current circumstances, concerns, timelines, and goals. Partnering with an OCIO allows you to seamlessly integrate new and different strategies into client portfolios in a way that can closely align with the achievement of their specific goals.

Here’s how this collaboration could look:

Identifying opportunities: During initial consultations, you and the OCIO team work together to understand the client’s financial situation, risk tolerance, and investment objectives. This collaborative approach helps identify areas where advanced strategies could potentially enhance the portfolio’s performance and diversification.

Tailored strategy selection: Based on the client’s profile, an OCIO can recommend suitable advanced strategies customized to match the client’s specific goals, risk tolerance levels, and tax situation. Depending on client priorities, an OCIO might also suggest incorporating ESG investing principles to align financial goals with ethical and environmental considerations.

Integration and monitoring: Once a strategy is chosen, the OCIO helps you integrate it smoothly into the client’s portfolio. This may involve adjusting existing asset allocations or introducing new asset classes. They also provide ongoing monitoring and rebalancing when needed to help the portfolio stay aligned with the client’s evolving needs, exposure to risk, and current market conditions.

Beyond Traditional Asset Classes

As discussed, alternative investments, like private equity, real estate, and hedge funds, can offer distinct advantages for certain clients. These assets often exhibit a low correlation with the performance of traditional stocks and bonds. However, venturing into alternative investments requires a specialized skill set. 

OCIOs can provide the following support:

  • Facilitating due diligence: Selecting appropriate alternative investments requires thorough research and analysis. OCIOs use their expertise to conduct comprehensive due diligence on potential investments, assessing factors like the underlying investment thesis, the management team’s track record, and the associated risks.
  • Ongoing monitoring and risk management: Alternative investments are often complex and illiquid, requiring ongoing monitoring to make sure they will continue to align with the client’s investment goals. The OCIO team can provide continuous oversight and risk management services, reducing potential downside and keeping you informed about relevant changes.

By leveraging the OCIO’s expertise, RIAs can confidently incorporate non-traditional assets into their clients’ portfolios when appropriate, potentially unlocking new avenues for growth and diversification.

Technology and Ongoing Support

Technology continues to play an increasingly important role in analysis and the management of client portfolios. Following are some examples of how some OCIOs utilize advanced portfolio management and analytics platforms:

  • Enhanced portfolio modeling and optimization: These platforms allow for sophisticated modeling of various investment scenarios, enabling OCIOs to test and refine advanced strategies before integrating them into client portfolios. This data-driven approach can help identify the optimal allocation for each client’s circumstances.
  • Real-time data and reporting: Advanced technology makes accessing real-time market data and performance metrics easier to implement. This allows for continuous monitoring of client portfolios and facilitates timely adjustments when necessary. The OCIO team can also create detailed reports that clearly show clients’ portfolio performance and risk exposure.
  • Streamlined communication and collaboration: Technology platforms enable smooth communication and teamwork between you and the OCIO team. Secure online portals allow document sharing, progress updates, and real-time discussions on investment strategies. This makes the process more efficient and keeps everyone on the same page.

Maintaining Client Focus and Fiduciary Duty

Partnering with an OCIO doesn’t relieve RIAs of their fiduciary responsibility. You are still responsible for selecting an OCIO that matches your investment philosophy and overseeing the investment management process. However, the partnership can enhance your ability to fulfill your fiduciary duty by giving clients access to a broader investment universe, potentially leading to more diversified portfolios.

The OCIO team’s research capabilities enable RIAs to thoroughly assess all investment options, including complex strategies, leading to more informed investment decisions. Additionally, the OCIO’s ongoing monitoring and risk management help address potential issues and mitigate risks early in their cycle.

OCIO firms like Cornerstone Portfolio Research do the heavy lifting for you, enabling you to focus on growing your firm and building strong client relationships, which fosters a more successful and rewarding client experience.

Expertise on Demand With Cornerstone

The ever-evolving investment environment presents RIAs with both challenges and opportunities. Partnering with Cornerstone can unlock expertise on demand for advanced investment strategies and much more.

Cornerstone Portfolio Research is a team of dedicated CFA® Charterholders who serve as your investment research and portfolio management partners. We adapt to your existing systems so you don’t have to re-engineer your internal operations or client processes. We also work with you to keep your current investment philosophy intact so your clients don’t see dramatic changes.

Contact us today; we can discuss your specific needs and interests and learn more about how our comprehensive OCIO services can help you take your firm to a higher level.

An OCIO Can Help Your RIA

More about the author: Thomas Balis

Thomas holds a Bachelor of Science in Business from Ohio State and has since earned the Chartered Financial Analyst® (CFA®) designation as well as the Accredited Portfolio Management Advisor (APMA®) and Chartered Mutual Fund Counselor (CMFC®) certifications.