The Markets November 14, 2017

More Institutional Investors Seeking OCIOs

OCIOs are gaining momentum with health and hospital systems, defined contribution (DC) plans, public defined benefits (DB) plans, family offices, and sovereign wealth funds, as institutions face myriad investment-related, operational, and regulatory challenges, Cerulli Associates says.
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Cerulli Associates, a global research and consulting firm, expects that double-digit growth of worldwide outsourced chief investment officer (OCIO) assets managed on a partial or full discretionary basis will continue.

Cerulli predicts a 1Q 2022 base case assets under management (AUM) projection of $2.3 trillion, but says the market could be as large as $2.7 trillion.

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Cerulli’s latest report, U.S. Outsourced CIO Function 2017: Identifying Emerging Opportunities Across Institutional Investors, says most of OCIOs’ new business is coming from investors that are using the OCIO model for the first time and previously used an investment consultant under an advice-only relationship (78%). However, providers expect increasing opportunities to come from replacement mandates.

Together, defined benefit (DB) plans and nonprofits continue to represent the majority of the AUM of OCIOs polled by Cerulli (81.1%), with the greatest growth opportunities over the next two years expected to come from nonprofit (84%) and corporate DB (71%) clients for total portfolio services.

OCIOs are gaining momentum with a broader range of investors—health and hospital systems, defined contribution (DC) plans, public DB plans, family offices, and sovereign wealth funds, as institutions face myriad investment-related, operational, and regulatory challenges, Cerulli says. More than one-third of OCIO providers view sleeve mandates from public DB (42%) and private DC (40%) plans as being very important to new business opportunities over the next two years. Nearly half of providers anticipate health/hospital systems to be very important to the growth of their business for both total portfolio (44%) and sleeve (46%) mandates.

Use of an OCIO remains highest among smaller institutions with $250 million or less in AUM. During the next two years, providers polled expect the ”sweet spot” for total portfolio corporate DB (62%), nonprofit (59%), and health/hospital (70%) mandates to be in the $250 million to $1 billion range.

Most (90%) asset managers polled by Cerulli have won a mandate through an OCIO provider and have had the most success working with OCIOs that are affiliated with an investment consultant (70%). Nearly two-thirds (63%) of asset managers surveyed anticipate the OCIO business will be very important to their overall institutional sales goals in three years, up from 37% that currently view it as very important.

Information about ordering Cerulli’s report can be found here.

Client Service November 14, 2017

Millennials Want Employers to Provide Help With Finances

Nearly half (48%) of Millennials want their employers to provide access to a financial professional to create a personalized financial strategy.
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Broadly, Millennials are positive about the future with 70% optimistic about their financial prospects; however, this optimism is tempered with concerns about their ability to meet all of their financial goals, according to a supplement report to Bank of America Merrill Lynch’s 2017 Workplace Benefits Report.

The research finds that Millennials’ sense of realism about their situation leads to a generation of employees who are more engaged with their finances. Millennials want help that goes beyond retirement topics and empowers them to more effectively manage their finances today, while still saving for the future. They also tend to be more engaged and participate at higher levels in employer-sponsored savings plans and want to get help with financial matters in the workplace.

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Millennials expect that 65% of their retirement income will come from personal sources, compared to 55% for Generation Xers and 40% for Baby Boomers. Millennials also expect that 24% of their retirement income will come from continued work, compared to 19% for Generation Xers and 13% for Baby Boomers.

Forty-three percent of Millennials say they need help managing their efforts to save for retirement, while 40% want help with good general savings habits. Thirty-eight percent want help with paying down or managing debt, and 31% want help with budgeting.

Nearly half (48%) of Millennials want their employers to provide access to a financial professional to create a personalized financial strategy; 46% want employers to bring in financial experts to provide general training and education about financial matters; and 45% want education and training tailored to age or current financial issues they’re facing.

Millennials also say they want help via multiple channels: online, in-person, on a mobile device, in a seminar at work and online webinars.

More findings can be found in “A Closer Look at Millennials.”

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