Archive for February, 2021

Building the Next OCIO Powerhouse

02 / 18 / 2021
by Charles Skorina | Comments are closed

Growing a discretionary asset management or investment advisor business is tough.

We have yet to see an independent Outsourced Chief Investment Officer firm reach $100 Billion AUM through organic growth.

Most of them will never even reach $20 Billion.

Of the thirteen firms managing $50 billion or more on our annual OCIO list, only one – Alan Biller and Associates – launched as a pure-play OCIO and consulting start-up.  And they’re just over the $50 Billion line.

 

OCIO

Over $100bn AUM

 

AUM

(as of 6-30-20)

Mercer

$305.9

Russell Investments

$234.7

BlackRock

$228.0

SEI

$181.0

Goldman Sachs

$168.0

AON Hewitt

$162.7

Willis Towers Watson

$148.0

State Street Global Advisors

$145.6

 

$1,573.9

 

 

OCIO

$50bn to $100bn AUM

 

AUM

(as of 6-30-20)

Northern Trust

$88.7

Wilshire Associates

$73.4

JP Morgan Asset Mgmt

$63.3

Vanguard

$57.0

Alan Biller and Associates

$51.1

 

$333.5


Total OCIO assets have been growing briskly, at more than 15 percent annually (In the 12 months July 2019 to June 2020).Most except Biller began as financial mega-firms long before OCIOs were even invented. Several have roots stretching far back into the nineteenth century. JPM goes all the way back to the 1800s!

Independent OCIOs and RIAs have not been able to grow their way into this select company, and probably never will.

Why is this?

But it’s scattered among dozens of relatively small firms.

The solution seems obvious: Do it the old-fashioned way. Grow by acquisition and aggregation. Buy, sell, and merge firms. That’s how the mega-financials have done it.

It’s a well-understood historical process. Railways, utilities, steelmakers, banks, brewers, hotels, airlines all grew like this.

The boffins at Harvard Business School call it the Industry Consolidation Lifecycle. (See: https://hbr.org/2002/12/the-consolidation-curve)  It’s easy to see after the fact, but much harder when we’re all floundering through it in real time.

And yet, for most OCIOs under $50 Billion, there seems to be a deep aversion to mergin’.



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