Finding the Right Balance: Customization and Standardization in OCIO Solutions

As more endowments, foundations, and other institutional investors consider OCIO (Outsourced Chief Investment Officer) partnerships, a common question comes up in our work with committees:

How customized does this really need to be?

The move toward OCIO models in the endowment and foundation (E&F) world is often driven by increasing complexity. Achieving a long-term rate of return that outpaces inflation and spending now requires expanding beyond traditional asset classes like stocks and bonds. This expansion brings greater operational challenges when implementing complex portfolios with many line items.

Yet, a complex portfolio does not have to mean a complicated OCIO arrangement. Many OCIO providers offer “best-in-class” solutions through scalable platforms. These platforms allow clients to customize asset allocation based on their target returns and risk tolerance, while also standardizing manager selection and simplifying implementation through pooled vehicles. When well-designed and properly aligned, these vehicles provide diversified portfolios, transparent and fair access to limited-capacity managers, and the convenience of a single K-1.

Some clients are cautious about scalable “best-in-class” solutions and OCIO-created vehicles. However, these options can often address organizational pain points, depending on the institution’s unique needs and characteristics.

To build an effective OCIO relationship, it’s essential to first understand the core reason for adopting a delegated governance model.

What is the main pain point?

• Operational strain

• Governance gaps

• Performance dissatisfaction

• Leadership transition

Once the primary challenge is clear, the scope and delegation of the OCIO relationship can be structured intentionally to address those needs.

For example, an organization facing operational strain during portfolio implementation has several choices: using an OCIO-administered vehicle or an external fund-of-funds, adding internal resources or systems to simplify implementation, or delegating operational services, such as capital call management, to its advisor. On the other hand, vehicles or model portfolios may not work well for institutions expecting significant asset growth. For these organizations, the ability to customize portfolios and build recent relationships with fund managers can help ease the eventual transition from an OCIO to an internal investment office.

In my experience, the most successful OCIO relationships are not defined solely by investment capability. They require a big-picture perspective, the ability to balance institutional discipline with organizational dynamics, and the option to customize when it adds value. Ultimately, customization should serve the strategy, not complicate it. Before designing the model, institutions should define the problem they are solving. That clarity will determine everything that follows.