The Value of GIPS Compliance: 2020 OCIO Survey Results
The Outsourced Chief Investment Officer (OCIO) model became widely adopted about a decade ago and has experienced rapid growth since. Today, the OCIO market is evolving with a greater focus on performance track records. This puts pressure on OCIO providers to standardize practices around performance measurement and marketing. Many OCIOs are looking to distinguish themselves in the marketplace in order to gain the attention of asset owners looking for this type of model. One way for OCIOs to do this is to claim compliance with the Global Investment Performance Standards (GIPS®).
In 2019, CFA Institute released the 2020 GIPS standards. The previous version was geared more towards traditional institutional managers and did not specifically address how OCIOs could implement the GIPS standards. Although some OCIOs were able to successfully navigate the 2010 edition of the GIPS standards, these firms were the minority. The new 2020 GIPS standards were written to be more inclusive of multiple asset management models including pooled funds, asset owners, and OCIOs
The 2020 GIPS standards are a voluntary set of standards and adoption in many other markets has been driven by demand. In the OCIO market, the demand will come from asset owners, such as pension plan sponsors, endowments, and foundations. For many endowments and foundations, it is in their Fall committee meetings where they typically review performance and initiate OCIO searches through a RFP. Pension plan sponsors need to demonstrate fiduciary prudence under ERISA by evaluating, among other things, the OCIO’s performance track record. This interaction continues to steer the direction of industry standards in the OCIO market.
Asset owners are increasingly asking these types of questions:
- Do OCIOs show composite performance or individual account performance when marketing?
- Are OCIOs considering claiming compliance with the 2020 GIPS standards?
- Are OCIO RFPs inquiring about claiming compliance with the GIPS standards?
To help address these questions, ACA and Curcio Webb conducted an industry survey in August 2020 focusing on the value of GIPS compliance among OCIOs. The results show a growing interest in compliance with the 2020 GIPS standards.
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