Key Takeaways
- • According to Cerulli Associates, U.S. assets managed by OCIO providers reached $2.9 trillion by year-end 2023 and are projected to reach $4.2 trillion by year-end 2028, an average annual growth rate of 7.9%.
- • Jim Link, head of the OCIO business at U.S. Bancorp Asset Management, says PFM Asset Management's OCIO assets have grown from $20 billion at the 2021 acquisition to $36.1 billion as of March 31, 2024, ranking the unit 18th among U.S. OCIO providers per Pensions & Investments.
- • Industry consolidation is under way as smaller boutique OCIO firms merge with larger financial institutions, which Link attributes to scale requirements in technology and people and to scarce capital.
- • OCIO pricing pressure is emerging as the market matures, while GIPS performance standards are improving comparability for clients.
- • Foundations, endowments and nonprofits face policy-driven changes in taxation and funding, and some large higher-education endowments are selling private assets, which may signal a shift toward more liquid holdings.
Summary
Assets managed by outsourced chief investment officer (OCIO) providers in the U.S. reached $2.9 trillion by year-end 2023, according to data compiled by Cerulli Associates. Cerulli projects those assets will reach $4.2 trillion by year-end 2028, reflecting an average annual growth rate of 7.9%. The growth is attributed to increasing market volatility and more complex regulatory requirements that prompt organizations to outsource their investment oversight.
Jim Link, head of the OCIO business at U.S. Bancorp Asset Management, Inc., discussed the changes in the segment and in his team since its move into the bank's asset management arm through the PFM Asset Management acquisition in 2021. At the time of the acquisition, PFM Asset Management had $20 billion in assets under management. As of March 31, 2024, the unit reported $36.1 billion and ranked as the 18th largest U.S. OCIO provider by Pensions & Investments. Link said the team has expanded technology and operations capacity, integrated the legacy U.S. Bank Institutional Asset Management team, and added personnel from Highmark Capital Management through the MUFG Union Bank acquisition. Senior hires include Michael Kelly and Chris Reynolds, who focus on endowments and foundations, and Michael Murray, who leads OCIO business development for the Midwest and national sales.
Link described consolidation as the main structural change in the industry. Several smaller boutique OCIO firms have merged with larger institutions as providers conclude they cannot serve every client type and need scale in technology, people and capital. He cited access to the bank's broad product set and risk management infrastructure, including cybersecurity, as advantages for clients moving to a larger platform.
On market trends, Link said clients are more diverse in size and type and better informed about OCIO services, while providers face pricing pressure typical of a maturing market. He pointed to CFA Institute Global Investment Performance Standards (GIPS) as adding structure that allows apples-to-apples comparisons. Among foundations, endowments and nonprofits, he identified possible federal funding and tax changes as a significant consideration, noting that some large higher-education endowments are selling private assets, which may presage a move toward more liquid investments.
Looking ahead, Link said U.S. Bank leadership supports scaling the OCIO business through technology investment, improved reporting and trading capabilities, and process automation to serve current clients and attract larger, more complex mandates.
Jim Link, head of the OCIO business at U.S. Bancorp Asset Management, Inc., discussed the changes in the segment and in his team since its move into the bank's asset management arm through the PFM Asset Management acquisition in 2021. At the time of the acquisition, PFM Asset Management had $20 billion in assets under management. As of March 31, 2024, the unit reported $36.1 billion and ranked as the 18th largest U.S. OCIO provider by Pensions & Investments. Link said the team has expanded technology and operations capacity, integrated the legacy U.S. Bank Institutional Asset Management team, and added personnel from Highmark Capital Management through the MUFG Union Bank acquisition. Senior hires include Michael Kelly and Chris Reynolds, who focus on endowments and foundations, and Michael Murray, who leads OCIO business development for the Midwest and national sales.
Link described consolidation as the main structural change in the industry. Several smaller boutique OCIO firms have merged with larger institutions as providers conclude they cannot serve every client type and need scale in technology, people and capital. He cited access to the bank's broad product set and risk management infrastructure, including cybersecurity, as advantages for clients moving to a larger platform.
On market trends, Link said clients are more diverse in size and type and better informed about OCIO services, while providers face pricing pressure typical of a maturing market. He pointed to CFA Institute Global Investment Performance Standards (GIPS) as adding structure that allows apples-to-apples comparisons. Among foundations, endowments and nonprofits, he identified possible federal funding and tax changes as a significant consideration, noting that some large higher-education endowments are selling private assets, which may presage a move toward more liquid investments.
Looking ahead, Link said U.S. Bank leadership supports scaling the OCIO business through technology investment, improved reporting and trading capabilities, and process automation to serve current clients and attract larger, more complex mandates.
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