Asset owners are increasingly turning to an Outsourced Chief Investment Officer (OCIO) structure. The OCIO model has historically been popular among defined benefit pension schemes. BlackRock notes, in recent years, there is more interest from new client segments such as insurers, endowments, foundations, and family offices.
This demand has occurred against an increasingly complex backdrop for investors. BlackRock experts believe we are in a new macro regime of greater volatility and uncertainty. This calls for a more dynamic approach to investing.
BlackRock Investment Institute identify three key investment approaches:
- Steering portfolio outcomes
- Managing macro risk
- Harnessing mega forces
Firstly, an OCIO can help clients steer their investment portfolios by using dynamic management. We regularly review our clients’ strategic asset allocation while tactical asset allocation is built into the investment process, allowing our portfolio to react quickly to changing markets. This agility is crucial for clients where trustees may meet only once a quarter.
Secondly, an OCIO can potentially help manage macro risk. Today’s macro outlook can either punish or reward, depending on the exposure investors choose to take. Uneven market reaction to rate rises coupled with ballooning government debt means a large-scope, a whole-portfolio view is required.
Finally, the OCIO team at BlackRock aims to harness mega forces, which include digital disruption and AI; the fragmented world; energy transition; demographic divergence; and the future of finance. By identifying these mega forces, we enable investors to align their portfolios with the trends we believe will shape the future.
Read the full whitepaper here.
This article is a summary of BlackRock’s PensionShip podcast, featuring Lara Edmonstone-West, UK OCIO Business team, Paul Sheffield, Chief Investment Officer, UK Pensions, Devan Nathwani, Portfolio Strategist, BlackRock Investment Institute. You can listen to the full recording and rest of the series here.
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