In response to strong client demand, outsourced CIO managers are developing new investment strategies or enhancing existing approaches to improve diversification for defined benefit and defined contribution plans and other asset owners.
Among the investment innovations for OCIO portfolios, executives of outsourcing firms pointed to their addition of more alternative investment strategies to pump up returns; commingled investment trust funds for use in both defined benefit and defined contribution portfolios; adding annuities within defined contribution plan OCIO portfolios and target-date funds; and partnering with money managers to create customized funds for client portfolios.
OCIO managers said they have seen very healthy interest and inflows in their strategies amid a tough investment environment in 2022 from all sizes of corporate defined benefit and defined contribution plans, and generally smaller public defined benefit plans, endowments, foundations and sovereign wealth funds.
When it comes to innovation, Wilshire Advisors LLC, Santa Monica, Calif., has a long legacy of building customized investment portfolios for investors, but launched the firm's first collective investment trust funds in 2021, said Ryan L. Lennie, Pittsburgh-based managing director, portfolio management, in an interview.
Users of the commingled funds include corporate DB and DC plans as well as public pension plans, but the funds also are used by Wilshire in building OCIO portfolios.
"We can build OCIO portfolios across the spectrum of CIT funds," Mr. Lennie said, adding that Wilshire is also adding alternative investment CIT funds with the recent launch of a long-credit fund. A diversified real assets CIT including real estate, commodities and global infrastructure will go live in the third quarter.
Wilshire ranked 23rd in worldwide institutional ranking with OCIO assets managed with full/partial discretion totaling $23.1 billion as of March 31, up 13.2% from the same date in 2021.