Sponsors of ever-larger corporate retirement plans are considering outsourced CIO arrangements this year, laying the groundwork for a flurry of deals where OCIOs take on both multibillion-dollar pension portfolios as well as the in-house investment teams that previously oversaw them.
Industry veterans say the trend could continue to pick up steam.
"There's probably only been 10 of these (deals) that have been done globally, but we're seeing more interest through RFPs and other situations like that," said Gregory Calnon, a New York-based partner and global head of multiasset solutions with Goldman Sachs Asset Management.
- Four huge deals of this kind have been announced since the summer of 2021, with a combined $55 billion or so in assets shifting to OCIOs — along with intimate and expert knowledge of those pension funds: Royal Mail Pension Plan, London, transferred £8.8 billion ($10.8 billion) in assets and a three-person in-house investment team including CIO Ian McKnight to BlackRock Inc. in February.
- Centrica, Windsor, England, in April 2022 appointed Schroders Solutions as OCIO for £10 billion in assets across three plans, in a deal that also saw the energy provider's seven-person investment team led by CIO Chetan Ghosh join the manager.
- Also in April 2022, Canadian business jet manufacturer Bombardier Inc., Montreal, hired Goldman Sachs Asset Management to run $5.4 billion in pension and insurance assets, as well as $3.6 billion in pension fund assets for clients no longer related to Bombardier. Former members of the Bombardier Global Pension Asset Management team joined GSAM under the arrangement.
- British Airways, Harmondsworth, England, appointed BlackRock in June 2021 as OCIO for £21.5 billion in assets across two plans. The assets had been run in-house by British Airways Pension Investment Management Ltd., and the arrangement included the transfer of CIO David Stewart, Deputy CIO John St. Hill and other investment staff to BlackRock.
The OCIO market continues to grow, as does the scale of corporate plans potentially in play.
Early on, smaller plans — for the U.S. market, mostly $250 million and below — were driving OCIO industry growth but more recently larger plan sponsors have looked at that option and "we've seen bigger transactions take place," noted Davis Walmsley, a New York-based principal with Broadridge Financial Solutions Inc.'s asset management advisory business.
Data compiled by Pensions & Investments show that OCIO assets managed for institutional investors across the globe — under full or partial delegation arrangements — totaled about $2.66 trillion as of March 31, 2022, up 5.4% vs. figures in 2021 and up 86.1% vs. 2017.
Money management consultant Chestnut Advisory Group LLC expects global OCIO assets under advisement to exceed $4 trillion by 2026.