Discretionary Services

Discretion Defined

There has been a trend in the investment consulting industry since 2008 called “Outsourced Chief Investment Officer” or “Outsourced CIO” or “OCIO”.  This is where institutions outsource the investment decision making process to a third party investment consultant like Monroe Vos.  The main drivers of this trend are the skyrocketing complexity and volatility of the markets, and the inability of investors to get the people, systems and required in-house talent to properly manage the portfolio.  Institutional investors have traditionally gone down the route of hiring nondiscretionary consulting help, but investment committees have been slow to react in volatile markets.

As a result we offer three structures to our clients to facilitate timely decision making, especially during volatile periods like 2008:

First is the traditional structure where we recommend changes in asset allocation and/or managers, and the Investment Committee approves these changes prior to execution of the changes.

Second is what we call “Quasi-OCIO”.  This is where a designated person with the Foundation is authorized by the Board to approve recommended changes to asset allocation and/or managers when we recommend these changes, within boundaries set out in the Investment Policy Statement.  The changes are reported to the Investment Committee by email or at the next regularly scheduled meeting.

Third is the OCIO structure.  In this structure Monroe Vos is given discretion to make changes in asset allocation and/or managers as it sees fit within the boundaries set out in the Investment Policy Statement, like the maximum and minimum exposure to each asset class and the manager quantitative and qualitative criteria.  This structure gives the investment program flexibility to move out of the way quickly in the case of a crisis like 2008 and to move into opportunistic investments to increase return as opportunities present themselves.  The changes are reported when made and thoroughly discussed at the next regularly scheduled meeting.

In all cases the recommendations will be the same.  The only difference is the timeliness of the execution of changes.