Executive summary
Executive summary
The outsourced chief investment officer (OCIO) model has emerged as a preferred solution for investors seeking to uphold the highest fiduciary standards amid various disruptive forces, including increasing capital market and regulatory complexity, as well as the accelerating pace of technological innovation. These challenges have stretched organizational expertise and resources, prompting many to seek external support.
The UBS Partnership Solutions team maintains that the rise of the OCIO, while necessary and timely, remains an imperfect solution and that a better fiduciary model is emerging that can preserve the value created by the outsourcing model while simultaneously overcoming its inherent shortcomings.
We offer a critique of the OCIO model and an alternative approach that flips the logic of the OCIO model on its head by emphasizing the importance and value of an ‘insourced’ approach. Read the key points below or download the full PDF.
Key points
Key points
1. Background
- Growth & adoption: OCIO assets under management have surged from USD90 billion in 2007 to USD3 trillion in 2023, with further growth expected over the years.1
- Value proposition: OCIO offers a distinguished model from traditional investment consulting, where an organization’s investment function is either fully or partially outsourced to a third-party firm. OCIOs have traditionally promised dedicated fiduciary partnerships, cost savings, superior performance, improved governance and customization.
- Challenges: in practice, with greater OCIO market penetration, there has been increased awareness and scrutiny of the model. Some argue that the OCIO model has fallen short of its promises. OCIOs face scrutiny over conflicts of interest, opaque fee structures, lack of transparency and a tendency towards standardized solutions rather than true customization.
2. The limits of outsourcing
- Cost opacity: layered fees and indirect costs make it difficult for trustees to benchmark and assess value.2
- Fiduciary responsibility: legal liability remains with the client, even when functions are delegated.
- Complexity & control: outsourcing can create a “black box” effect, limiting real-time oversight and agility.
Figure 1: The OCIO value proposition: promise vs. practice
3. The rise of the insourced-CIO (ICIO)
- Client-centric ecosystem: The client’s technology stack, data and workflows remain the central hub of the operating model.
- Integrated partnership: The service provider acts as a genuine extension of the internal team, amplifying existing capabilities rather than simply replacing them.
- Shared technology layer: Often, both the client and the provider operate on a shared, open-architecture platform, creating a single source of transparency and enabling seamless collaboration. This is a fundamental reordering of the client-provider relationship that places control, transparency and customization at the forefront
4. Technology as a catalyst
- Modern platforms: advances in financial technology have made lean, powerful in-house investment teams achievable for more institutions.
- Open architecture: best-in-class ICIOs are platform-agnostic, transparent and free from conflicts of interest.
- Cybersecurity & compliance: robust protocols and documented processes are essential for co-fiduciaries operating within client environments.
Figure 2: The in-sourcing model
Conclusion
Conclusion
The investment landscape is at an inflection point. The traditional OCIO model was a vital step, offering a lifeline to resource-strapped institutions. But for fiduciaries seeking to achieve the highest standards of investment performance, governance, agility and alignment, simple delegation is no longer enough. We believe the future lies in a more integrated, technology-driven partnership. The ICIO model. One that empowers the institution, enhances its capabilities and builds a resilient foundation for long-term success.
