Fewer fiduciary risks, greater access to private markets investments, improved corporate governance and lower costs are among the reasons retirement plan sponsors choose outsourced chief investment officer services, producing an asset surge under OCIO management plus predictions that there’s more to come.
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Fiduciary risk is a “commonly cited reason” when DC sponsors consider OCIO services, said Aaron Chastain, partner and corporate solutions leader for the NEPC consulting firm.
Hiring OCIO services doesn’t eliminate fiduciary risk because sponsors have a fiduciary duty to monitor OCIO activities, and sponsors’ ERISA lawyers are “very involved” in making sure sponsors understand their responsibilities, he added
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For many sponsors, OCIO is “a more efficient way to access alternatives investments,” Chastain said. “It allows sponsors to focus on policy decisions” about which — if any — private markets investment they want to offer. OCIO handles the manager selections, he said.
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“Employers first embraced OCIOs to outsource investment oversight, and PEPs are emerging as the next evolution, enabling them to offload much of the administrative burden of running a retirement plan,” Chastain said. “It allows organizations to focus on their core business while retirement plan experts handle the rest.”
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