Investors Prioritize Outsourced CIO Exit Strategies

FundFire, by Aziza Kasumov 

Institutional investors are increasingly paying attention to how they might unwind their outsourced CIO (OCIO) relationship – even as they’re just getting started with a new provider. The heightened focus comes after a generation of early OCIO adopters realized that it can take years to get out of some holdings, and they can still incur high fees for “legacy funds” that their old OCIO administered, search consultants tell FundFire.

“It’s very easy to sign up a new OCIO, but the exit strategy is a very critical deficiency,” Tom Donahoe, Managing Director of OCIO search and governance at Manager Analysis Services, said at an OCIO Solutions Summit last week  Donahoe said that often institutional investors don’t discuss exit language “when they jump into an OCIO agreement.” But once a provider is terminated, it’s “pencils down.” That creates “slippage where you can lose real value over a two or three week transition period simply because people are taking their eye off the ball,” Donahoe explained. (shortened for brevity) (6/17/19)