Key takeaways
An OCIO is a third-party investment specialist that takes on some or all the responsibilities traditionally handled by an in-house investment team. Acting as a fiduciary with discretionary authority, the OCIO makes and implements investment decisions on your behalf within agreed-upon guidelines.
These relationships are flexible. Some organizations outsource an entire investment program; others delegate only specific functions or asset classes, such as:
Alternative investments
Asset allocation implementation
Liability-driven investing
Risk management
Solutions for institutional investors with varying objectives, governance structures, and investment complexity.
Defined benefit
plan services
Support across the full DB plan lifecycle.
- Liability-driven investing and investment management
- Actuarial consulting and plan termination strategy
- Pension risk transfer and risk management
- Administrative services and ongoing plan support
Trust and
custody services
Safeguard assets while supporting operations and reporting.
- Custody, trust, and fiduciary services
- Financial analytics and specialty reporting
- Rabbi trust and benefit payment services
- Custody for alternative investments
Endowments, foundations, and
corporate reserves
For organizations funding long-term missions.
- Discretionary investment management
- Governance and spending policy support
- Alternative investment oversight
- Board-level reporting
Discretionary fiduciary responsibility
We accept it in writing, supporting stronger governance and clearer accountability.
Open-architecture investment platform
Investments selected across the broader marketplace, not limited to proprietary products.
Transparent fee structure
Full transparency and no out-of-scope billing.
Customized investment strategies
Built around your objectives, constraints, and governance structure.
An OCIO relationship can influence everything from governance and oversight to investment execution and risk management. Understanding how the model works and what to consider when evaluating providers can help your organization select a partner aligned to your goals and fiduciary needs.
Outsourcing doesn’t mean surrendering control. Your board sets strategic direction; the OCIO implements within it. The governance shift is from making individual investment decisions to overseeing strategic outcomes.
- Defines investment objectives
- Establishes risk parameters
- Approves investment policy
- Monitors outcomes and fiduciary performance
- Evaluates the OCIO relationship
- Implements investment strategy
- Manages risk exposure
- Selects and monitors investment options and their managers
- Executes portfolio changes
- Provides reporting and recommendations
Understanding the difference between the models can help determine which is the best fit for your organization.
| Compare by | OCIO | In-house CIO |
|---|---|---|
| Decision-making authority | Implements within agreed investment guidelines | Full internal authority |
| Fiduciary role | Discretionary investment management fiduciary | Internal responsibility |
| Implementation speed | Fast within agreed guidelines | Depends on resources |
| Internal workload | Reduces organization’s day-to-day burden | Dedicated staff required |
| Cost structure | Applicable advisory fee + fund expenses; structure varies | Salary, systems, benefits, fund expenses |
Whether you’re just beginning to explore the model or preparing a formal search, the same criteria can apply:
- Fiduciary role. Determine whether the provider accepts discretionary fiduciary responsibility—in writing—and clearly defines its accountability.
- Investment approach. Understand how investment decisions are made, how managers or investment options are selected, and how portfolios are monitored over time.
- Open architecture investment platform. Ask if available investments are selected from across the marketplace or are limited to proprietary products. That flexibility may help reduce conflicts of interest and broaden investment opportunities.
- Industry experience and team. Look for experience serving organizations similar to yours —nonprofits, credit unions, pension plans, family offices, or healthcare systems—and evaluate the credentials, investment resources, and succession planning of the team you’d work with.
- Reporting and communication. Ask how often you’ll meet and how performance, risk, fees, and progress toward objectives will be communicated.
- Fees and transparency. Look for providers that clearly explain what services are included, total program costs, underlying investment expenses, and any additional fees. (More on fee structures below.)
Fee structures vary across providers, so understanding how pricing works is an important step in the evaluation process.
| Fee model | How it works | Tends to fit |
|---|---|---|
| Asset-based | A fee based on assets under management, typically in basis points. The most common structure. | Programs where cost should scale with the portfolio |
| Flat | A fixed annual fee regardless of asset size. | Stable programs that need budget predictability |
| Tiered | Rates decline as portfolio assets increase. | Growing portfolios expecting to cross asset size breakpoints |
Every organization is different, but several benefits drive adoption of the model.
Institutional investment expertise
Experienced professionals, research capability, and institutional capabilities without building it internally.
Stronger governance and fiduciary oversight
Disciplined decision-making and clearer accountability for investment outcomes.
Faster response to market conditions
Committees meet quarterly; markets move daily. An OCIO adjusts as risks and opportunities emerge.
Broader investment opportunities
Private markets, alternatives, specialized fixed income, and liability-driven strategies.
Improved operational efficiency
Executive teams redirect time to planning, member services, fundraising, and mission.
Benefit from scale
Institutional relationships and operational efficiencies that can improve overall program economics.
An outsourced chief investment officer is a third-party fiduciary that manages some or all of an organization’s investment program. The OCIO assumes responsibility for implementing investment decisions within agreed guidelines while the board or committee retains strategic oversight.
An investment consultant typically provides recommendations that must be reviewed and approved by the organization. An OCIO has discretionary authority to implement investment decisions within established policy guidelines, allowing for more timely execution and ongoing portfolio management.
No. OCIO services are used by organizations of many sizes, including nonprofits, foundations, credit unions, healthcare organizations, pension plans, and other institutions. The appropriate model depends more on governance needs and available internal resources than portfolio size alone.
OCIO fees may be structured as a percentage of assets under management, a flat fee, or a tiered fee based on portfolio size and complexity. Organizations should evaluate not only the headline fee but also any underlying investment expenses and additional service costs.
Organizations of many types and sizes—both those with modest internal investment resources and those managing highly sophisticated portfolios.
Professional investment management
Access to specialized asset classes
Board-ready reporting
Institutional-quality management
Governance and risk oversight
Liquidity management
More competitive bond pricing
Risk mitigation
Asset and liability management
Liability-driven investing
Funding policy
Pension risk management
Top 30 U.S. provider of outsourced assets
560+institutional clients served
43Dedicated investment professionals
$22B+assets under management
Organizations choose Principal for a fiduciary-focused investment partner with institutional resources, flexible solutions, and transparent governance support.
The U.S. OCIO market has more than tripled since 2015, to $3.3 trillion at the end of 2024
Today, Principal is a top 30 U.S. provider of outsourced assets, with more than $22 billion in OCIO assets under management and a team of 43 investment professionals serving more than 560 institutional clients.
