Key Takeaways
- • Cambridge Associates argues that institutions with growing endowments should adopt a hybrid "build and buy" resource model rather than choosing strictly between outsourcing and insourcing.
- • The article states that external partnerships should not be viewed as a compromise or stopgap on the way to full insourcing; they can be the most deliberate expression of institutional priorities.
- • Institutions should start with resourcing needs (scope, quality of execution, decision pace, governance capacity) rather than headcount or organizational charts.
- • The CIO remains accountable for investment outcomes even when using external partners, so authority over partner selection, oversight, and replacement should align with that accountability.
- • Cost discipline matters: both underspending and overspending can weaken net performance, and Cambridge Associates tracks reasonable investment management cost ranges for endowments and foundations.
Summary
As endowments grow in size and complexity, institutions are weighing which investment capabilities should be built internally and which should be accessed through external providers. According to the article, the question is becoming more pressing as investment offices contend with accelerating technology, including artificial intelligence and a data-saturated environment that introduces new risks of misinformation and governance challenges. The piece, attributed to Cambridge Associates, argues that the "build or buy" decision is often framed too starkly. Instead, the most successful model is typically a hybrid that uses internal resources where institutional participation matters most and external partners where specialization, execution, or operating efficiency can be accessed more effectively.
The article assigns clear ownership for resource decisions. The chief investment officer leads the investment program, unless the investment committee has hired an outsourced CIO or established another structure. The CIO assembles the people, processes, and tools needed to manage the portfolio, hires internally for responsibilities tied closely to the institution's mission, and hires externally when it is the most efficient way to access scale, expertise, or technology. The investment committee oversees the program and conducts an annual review of the CIO, including the CIO's management of the team and key external partners, and a governance review can clarify roles as the resource plan evolves.
On staffing, the article cautions against starting with headcount. Institutions should first define the scope of work, the required quality of execution, the pace of decision-making, and the degree of oversight their governance structure can support. Internalization is not treated as an end in itself; the goal is the right resources for the organization's needs, not the largest in-house team. The article recommends focusing internal resources on capabilities central to the institution's identity and decision-making, such as functions tied to mission, governance, liquidity needs, spending policy, or culture, while using outside expertise to add workload capacity and broaden networks and knowledge.
Implementation, according to the article, requires mapping the investment office's functions and evaluating each against consistent criteria, including cost. The article notes that external partners do not reduce the CIO's accountability for process or results, so the CIO should hold discretion over partner selection, oversight, and replacement. The article concludes that the most effective investment offices are designed with intention, knowing where internal leadership, specialist partnership, and operational discipline each add value. Such a model should reflect portfolio complexity, governance capacity, hiring and retention realities, and the ability to incorporate new technology while remaining adaptable as the institution grows.
The article assigns clear ownership for resource decisions. The chief investment officer leads the investment program, unless the investment committee has hired an outsourced CIO or established another structure. The CIO assembles the people, processes, and tools needed to manage the portfolio, hires internally for responsibilities tied closely to the institution's mission, and hires externally when it is the most efficient way to access scale, expertise, or technology. The investment committee oversees the program and conducts an annual review of the CIO, including the CIO's management of the team and key external partners, and a governance review can clarify roles as the resource plan evolves.
On staffing, the article cautions against starting with headcount. Institutions should first define the scope of work, the required quality of execution, the pace of decision-making, and the degree of oversight their governance structure can support. Internalization is not treated as an end in itself; the goal is the right resources for the organization's needs, not the largest in-house team. The article recommends focusing internal resources on capabilities central to the institution's identity and decision-making, such as functions tied to mission, governance, liquidity needs, spending policy, or culture, while using outside expertise to add workload capacity and broaden networks and knowledge.
Implementation, according to the article, requires mapping the investment office's functions and evaluating each against consistent criteria, including cost. The article notes that external partners do not reduce the CIO's accountability for process or results, so the CIO should hold discretion over partner selection, oversight, and replacement. The article concludes that the most effective investment offices are designed with intention, knowing where internal leadership, specialist partnership, and operational discipline each add value. Such a model should reflect portfolio complexity, governance capacity, hiring and retention realities, and the ability to incorporate new technology while remaining adaptable as the institution grows.
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