The Right OCIO Can Cure Insomnia in Restless Markets

Can an OCIO provider help during times of market volatility?

I'd sure say so. As a former chief investment officer (CIO) who had to navigate the 2008 Global Financial Crisis without one, I wish I’d known then what I know now from sitting on the other side of the desk.

Let me explain.

First, a skilled outsourced chief investment officer or OCIO can help your organization establish the right investment strategy well before the going gets rough. This is critical because the overwhelming majority of an investment program's success or failure can usually be traced back to its strategic asset allocation and liability-hedging strategy. Strategic asset allocation is a high-impact, but low-frequency decision. If it's done right, it shouldn't need to change much—even during a global trade war.

Coordination chaos

When major market events strike, it’s even harder to generate excess returns. As a CIO, trying to do this on my own by assembling the best managers meant facing one terrifying truth: Coordination across managers was limited.

For instance, no one expected Manager A to have any visibility into or responsibility for understanding anything in Manager B's portfolio. If their combined exposures created common active-management biases such as high volatility or beta and momentum, that was my responsibility. I always knew that. But I didn't understand how poorly equipped I was to meet that challenge—until the hard questions came at the hardest possible time. During GFC.

When the CFO asked about my company's exposures—about what we owned and what it was worth—it was a tough question to answer because my aggregate manager view was limited. The review cycle occurred no more often than once a quarter and even then, it wasn't a live view. It was decidedly backward-looking.

Clear visibility

Fortunately, as I learned once I came to an investment solutions firm, it doesn’t have to be this way. World-class OCIO providers have robust risk management tools that can see the entire holdings in a portfolio—all the way down to the street level.

For instance, at Russell Investments, our METRiQ platform lets us know precisely what our OCIO clients own at any given time. This information can be shared with clients on demand. It’s not hard to imagine hearing a news report on tariffs and being asked by your investment board how that may impact your current holdings. Hopefully, it's also not hard for you to imagine sending an urgent request to your OCIO provider and getting a thorough analysis back in time for your board meeting.

Rebalancing roadblocks

As a CIO in 2008, my organization's equities cratered, causing asset allocations to move outside of allowed ranges. I had to deal with the question of rebalancing. Because we didn't have an OCIO in place, these decisions were often subject to committee approval and discussion.

The problem? Investment committees are composed of human beings and this "let's discuss it" process often caused fear to impede or delay a rebalancing decision that was designed in calmer times to ensure a specific risk budget was maintained.

Many times, staring down the fear and reverting to the planned strategy represents the best option for recovery. Best-in-breed OCIOs know this and can act accordingly by removing emotion from the decision.

Parking your emotions

At Rusell Investments, we do this by assuming rebalancing responsibilities and documenting the key parameters in our clients' investment policies. For these clients, it would be rare not to execute according to the policy. But in choppy markets, we still keep a close eye on things, focusing on managing risk and potential buying opportunities.

Our objective is to do all of the above in the most cost-effective way possible. Minimizing transaction costs requires a world-class trading capability. It also requires traders with decades of experience—through bear markets, drops and bounces, and so many unexpected events that the traders become wired to expect the unexpected. It's vital for your OCIO partner to know through experience what it costs to move money in normal markets, as well as what you are up against when moving money in stressed markets.

One more thing

In addition to rebalancing, many investment programs could benefit by moving beyond hedging strategies that are solely focused on fixed income to take a total portfolio approach. Including an allocation to Treasuries usually provides both capital-efficient duration as well as downside risk management. But a total-portfolio-driven OCIO solution looks beyond just fixed income, including alts, overlays, and other less traditional diversifiers.

The bottom line

With all that's going on in the world right now, managing the day-to-day operations of an investment program may seem like an exceptionally tall order. But it doesn't have to be. Consider reaching out to an OCIO provider to help you sleep better at night.

A message from Advisor Perspectives and VettaFi: To learn more about this and other topics, check out some of our webcasts.

These views are subject to change at any time based upon market or other conditions and are current as of the date at the top of the page. The information, analysis, and opinions expressed herein are for general information only and are not intended to provide specific advice or recommendations for any individual or entity.

This material is not an offer, solicitation or recommendation to purchase any security.

Forecasting represents predictions of market prices and/or volume patterns utilizing varying analytical data. It is not representative of a projection of the stock market, or of any specific investment.

Nothing contained in this material is intended to constitute legal, tax, securities or investment advice, nor an opinion regarding the appropriateness of any investment. The general information contained in this publication should not be acted upon without obtaining specific legal, tax and investment advice from a licensed professional.

Please remember that all investments carry some level of risk, including the potential loss of principal invested. They do not typically grow at an even rate of return and may experience negative growth. As with any type of portfolio structuring, attempting to reduce risk and increase return could, at certain times, unintentionally reduce returns.

Frank Russell Company is the owner of the Russell trademarks contained in this material and all trademark rights related to the Russell trademarks, which the members of the Russell Investments group of companies are permitted to use under license from Frank Russell Company. The members of the Russell Investments group of companies are not affiliated in any manner with Frank Russell Company or any entity operating under the "FTSE RUSSELL" brand.

The Russell logo is a trademark and service mark of Russell Investments.

The information, analyses and opinions set forth herein are intended to serve as general information only and should not be relied upon by any individual or entity as advice or recommendations specific to that individual entity. Anyone using this material should consult with their own attorney, accountant, financial or tax adviser or consultants on whom they rely for investment advice specific to their own circumstances.

Products and services described on this website are intended for United States residents only. Nothing contained in this material is intended to constitute legal, tax, securities, or investment advice, nor an opinion regarding the appropriateness of any investment, nor a solicitation of any type. The general information contained on this website should not be acted upon without obtaining specific legal, tax, and investment advice from a licensed professional. Persons outside the United States may find more information about products and services available within their jurisdictions by going to Russell Investments' Worldwide site.

Russell Investments is committed to ensuring digital accessibility for people with disabilities. We are continually improving the user experience for everyone, and applying the relevant accessibility standards.

Russell Investments' ownership is composed of a majority stake held by funds managed by TA Associates Management, L.P., with a significant minority stake held by funds managed by Reverence Capital Partners, L.P. Certain of Russell Investments' employees and Hamilton Lane Advisors, LLC also hold minority, non-controlling, ownership stakes.

© Russell Investments Group, LLC. 1995-2025. All rights reserved. This material is proprietary and may not be reproduced, transferred, or distributed in any form without prior written permission from Russell Investments. It is delivered on an "as is" basis without warranty.