The $860 million Rockefeller Brothers Fund, New York, has used an outsourced CIO structure since 2007 after determining that running the portfolio internally was no longer a viable solution.
But it wasn't as simple as issuing an RFP, hiring a manager and being done with it. It was equally important to engage in due diligence to ensure that the investment outsourcer worked like an extension of the asset owner's own staff.
The foundation hired Charlottesville, Va.-based Investure LLC as its first OCIO in November 2007.
Over time, however, the foundation's needs began to change. In 2010, it wanted to dedicate 10% of its portfolio to impact investing, so the time had come to seek a new OCIO provider, said Geraldine Watson, vice president for finance and operations at Rockefeller Brothers Fund.
That led Rockefeller Brothers Fund to conduct a new search, which ultimately had the fund hire Perella Weinberg Partners as its new OCIO provider in February 2014. In both searches, finding the right OCIO was no easy task, Ms. Watson said. But since the fund was searching for an investment outsourcer that could act like an extension of its own internal office, the due diligence and extra legwork was worth it — if not essential, Ms. Watson said.
“For us, a strong commitment to partner with us in our objective to align our endowment with our mission was also critical,” Ms. Watson said.
Before the 2007 search that resulted in hiring Investure, the foundation did not have a fully staffed internal investment department. The foundation's portfolio had been managed through its investment committee, along with the management team and Cambridge Associates LLC as its consultant.
However, as investments became more complex, staff members realized that it was no longer the ideal solution, Ms. Watson said. The foundation needed to develop a structure where the investment committee could take a more strategic oversight role, rather than a day-to-day management role.
“We first considered strengthening our own internal resources and creating a high-quality CIO department,” Ms. Watson said. “But at the end of the day, we recognized the cost inefficiencies, for a foundation our size, in staffing up an internal CIO department that could well manage a complex portfolio.”
When the fund conducted its first search for an OCIO, the foundation's primary goal was to engage a high-quality provider with a proven investment track record that would function almost as if it were an extension of the fund's staff.
“The OCIO structure would facilitate a more nimble investment process and provide the depth of expertise focusing closely on our day-to-day investment management,” Ms. Watson explained.