Outsourced chief investment officer firms are now a recognized player in the wealth management industry. A new report urges these entities to consider another type of client.

Groups such as outsourced chief investment officers are increasingly making the relatively small, but growing health and hospital client segment an important client source, according to research from US-based Cerulli Associates.

These relatively small organizations, which lack wide resources, are open to the idea of using outsourced chief investment officers, for example, as well as considering money management ideas such as liability-driven investing (LDI), the group said in a report.

“Health and hospital organizations offer a sizeable opportunity for OCIO services, which have grown rapidly in the past decade in serving smaller corporate defined benefit plans, endowments, and foundations,” Alexi Maravel, director at Cerulli, said.

According to a 2018 Cerulli OCIO survey, 60 per cent of providers of total portfolio solutions indicated that these clients will be “very important” to their business during the next two years.

Outsourced chief investment officer firms have become a more familiar part of the world’s wealth industry in recent years, serving clients such as family offices that find the CIO role too demanding or expensive to perform in-house. Firms in the space include Hirtle Callaghan, as interviewed by Family Wealth Report, here.

Cerulli said liability-driven investment – a common idea now in pension funds and parts of the wealth management space - may be another area in which managers and investment consultants could better assist healthcare institutions.

“Cerulli’s research in the small to medium-sized segment of corporate DB plans (of which hospital plans are one constituency) reveals that most plan sponsors are only in the earliest stages of derisking pension liabilities from their balance sheets and are not properly allocated in their plan assets between liability hedging and risk-seeking instruments. This offers managers and consultants the opportunity to pivot their capabilities - normally provided to other corporate plans - to aid hospital plans.”

“Finally, hospital organizations need comprehensive risk analysis to make better investment decisions, which is a task that few of these institutions have undertaken,” Maravel, said. “Investment consultants and asset managers have the opportunity to conduct asset/liability studies, perform risk analysis, and develop a strategic asset allocation for the organization.”

See here for a story about a hire by the firm Fund Evaluation Group, which operates in the outsourced CIO space.