Tim Yates, managing director and head of the OCIO practice at Commonfund, a Wilton, Conn.-based investment manager for endowments and foundations, noted that endowments have also grown in size over the years, which has driven more non-profits to an OCIO model.
"A decade ago, it would be unusual if we talked to a $500 million endowment, but today our largest endowment client is around $1 billion," he said. "We are seeing the larger (endowments), with up to $2 billion, saying it makes sense ... to outsource this function," he said.
The rising complexity and costs of managing their portfolios, plus the array of OCIO models available to them, has also made providers attractive to non-profits, he said.
Commonfund was the second-largest manager of outsourced AUM for U.S. endowments, with $7.9 billion in AUM as of March 31, up nearly 6% from last year. Vanguard Group, Malvern, Pa., was the largest provider this year, with $8.2 billion in this client segment, up 47.8% for the year, the survey found.
Vanguard's overall OCIO assets under management (worldwide institutional with full and partial discretion) was $46.8 billion, up 12% from last year.
The largest managers of combined discretionary and non-discretionary assets for worldwide institutional investors, as of March 31, were Cambridge Associates LLC, with $232.4 billion in AUM, a 2.4% increase over last year; and Mercer, up 8.4% with $229.8 billion. Russell, which had $170.9 billion in assets in this channel, placed third and saw its assets grow by 4.4%. Rankings of the top three managers remained unchanged from last year.
Michael Cagnina, vice president and managing director of SEI Investments Co.'s institutional group, which provides OCIO services, noted that the industry has "changed significantly," with 81 OCIOs in the marketplace as of mid-2018.
That number has grown by about 55% since mid-2012, Mr. Cagnina added, citing data from executive search firm Charles Skorina & Co., Tucson, Ariz.
"Historically, (investors) were evaluating whether they should have an OCIO or a traditional consultant," he said. Now, there are OCIO search consultants, which are being hired to help investors pick the right service provider, he added. Furthermore, OCIOs are being tapped to provide comprehensive services beyond investment management.
An endowment, for instance, may want to know how an OCIO can provide education on getting new donors, Mr. Cagnina explained.
In the survey, SEI reported $97.5 billion in full and partial discretionary assets with worldwide institutional clients, down 5.5% from last year.
C. Kane Brenan, managing director, global head and co-chief investment officer of the global portfolio solutions group at Goldman Sachs Asset Management, New York, agreed that OCIO clients are searching for more holistic advice.
"For pension clients, it's how does the pension plan fit inside the whole corporation. How do they think about the right risk posture for the pension plan and how much hedging they should be doing? For health-care organizations, it's how do they think about all of their pools of capital — an operating pool, an endowment, a pension, a DC plan. How much liquidity should they have as they think about their credit ratings also is an important element when they have four pools of capital. For endowments and foundations, it's what their spend rate is and have they made multiyear grants," he continued.
"It's not just (that) you've got to beat the S&P this year. It's these big picture strategic questions," Mr. Brenan said. "Every year, I think we've added another (OCIO) capability on the advice side."
GSAM reported full and partial discretionary assets of $93.6 billion, up 14.7% for the year.