OCIO Assets Plummeted With Markets in 2022, but Don’t Call It a Crisis

Eight outsourced CIO providers dominate that field, which had been expanding nicely—until it encountered 2022’s harsh stock and bond market rout. Suddenly, this octet of big-time asset managers, who control slightly more than half the sector in terms of assets under management, saw their AUMs shrink, according to search consultant Charles Skorina & Co., which tracks the OCIO world.

The S&P 500’s vertiginous fall last year “was the main reason” for the unprecedented contraction,” Skorina says. The only one of the eight to eke out an AUM increase was BlackRock, whose outsourced CIO AUM grew by 2%. That growth was due to the addition of two huge accounts, $14 billion in assets from General Dynamics’ retirement plan and $36 billion from the International Brotherhood of Teamsters’ Central States Pension Funds.

The rest of the eight suffered a bloodbath, with WTW the least harmed (losing 12.7%) and Aon the most injured (down 32.6%). The largest provider, Mercer, owned by Marsh McLennan, dropped 16.9%. (BlackRock is ranked second.)

For years, there has been an ongoing trend for corporate plan sponsors to farm out management of their programs, or at least part of them, to outside vendors. The big players have raked in an outsized portion of the OCIO work, owing to their financial heft and brand recognition.

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Last year’s comedown was stunning for OCIOs, which have historically gained assets over time. In 2021, a good year for investors, assets for the top eight providers grew by an average of 10.2%. But in 2022, the average cascaded to negative 15.2%.

Expansion had been a seeming constant for OCIOs. A recent Vanguard Group study, covering 2015 through 2021, found that total OCIO AUM nearly doubled, to more than $2.5 trillion in AUM from $1.3 trillion, during that period.

So despite a down year, the OCIO business likely is not in some existential crisis and should resume growth: In CIO’s 2023 Outsourced Chief Investment Officer Survey, released in June, 7% of respondents said they plan to adopt the OCIO approach over the following 24 months.