Overall growth
When Pensions & Investments started surveying outsourcing managers in 2011, assets were only $599 billion. Assets have soared over the past decade to $3.5 trillion as of March 31, 2024. There are now 13 managers with more than $100 billion in worldwide outsourcing assets. In 2011, Russell Investments was the largest manager with $75.7 billion. Mercer is now the largest outsourced CIO manager and is closing in on $500 billion in OCIO assets.
Worldwide OCIO AUM is now $3.1 trillion, up from $940.6 billion in 2013, the first year the expanded and formal OCIO survey was conducted. Employees dedicated to the OCIO industry topped 6,000 in 2024.
On average, female employees made up 35% of OCIO managers' workforce, while minority employees represented an average of 24%. In terms of senior employees, women and minority employees were 23.9% and 16.3%, respectively.
Significant hires
Since 2010, the P&I editorial staff has reported 197 specific OCIO hires. In total, $718.8 billion in assets were allocated to external managers. The number of hires has remained fairly constant at around 10 per year. However, the size of the mandates has increased significantly since 2022. The average mandate size has increased to $6.3 billion from $1.4 billion.
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Asset allocations
OCIO managers have a variety of clients, but P&I asks about overall asset allocation of a firm's OCIO assets. As of the latest survey, public equities made up 43% of portfolios, 32% fixed income and cash, and 26% alternatives and other.
Within equities, U.S. public stocks were 25% of the total, while non-U.S. and global stock strategies were around 9% each. Private equity was 9% of the average asset allocations, while real estate, hedge funds and other alternatives were around 4% each. Other represented 6% of the total, with various real asset strategies and multiasset strategies being listed most often.
U.S. clients by type
In the latest survey, the number of U.S. clients grew to more than 16,000. This is up sharply from 4,680 in 2015, the first year the question was asked. Endowments and foundations accounted for almost 10,000 clients in 2024. U.S. defined benefit and defined contribution clients totaled 5,327 in 2024, with a variety of other clients types accounting for the remainder. PNC Financial Services Group Inc. had the largest number of clients, driven by 3,171 foundation clients.
U.S. retirement plan clients represented more than half of OCIO AUM, with defined benefit clients representing the 37.7%. Endowments and foundation clients represented a little more than 25% of U.S. OCIO AUM.
Data roundup
On average, 87.9% of OCIO mandates for all clients were for full discretion, with 65.9% of managers having only full-discretion mandates. The breakout for U.S.-based clients was almost identical.
Some 87.7% of mandates were for total portfolios, with 23 of 46 managers that responded to the survey question having only total portfolio mandates. The average was up from an average of 79.5% in 2013. The breakout for U.S.-based clients was roughly the same.
Some 47.8% of global OCIO AUM was in commingled investment vehicles, while 43.7% was in separate accounts. Other vehicles made up 6.5%.
Worldwide OCIO assets managed under ESG principles was $269.1 billion. Totals assets were down from 2021, the first year the question was asked. Specific OCIO ESG mandates were around $50 billion in 2024.
Some 61% of OCIO managers had specific policies to encourage the hiring of firms owned by women, minorities, disabled individuals and veterans. Mercer was the largest manager with a policy, accounting for $469.2 billion of the $1.1 trillion total. The managers that responded "no" with the largest amount of AUM were BlackRock and Aon. With that said, BlackRock had placed the most assets with WMDV-owned firms at $12.3 billion or around a quarter of the total. Of the managers that reported hiring WMDV managers, the average number was 19.
Conclusion
The OCIO industry continues to experience robust growth. At the current trajectory, a $5 trillion market in five years seems attainable, driven by both large and small assets owners outsourcing their investments. OCIO managers will increase their influence on the capital markets and the institutional investing community.