Due to the current complexities surrounding various investment vehicles and their increased due diligence provisions, endowments and foundations are mulling over the possibility to implement an outsourced CIO model, according to an SEI study.
The Oaks, Pa.-based firms’ quick poll, released Tuesday, tabulated responses from nearly 177 nonprofit executives and investment committee members who oversee assets ranging from $25 million to more than $1 billion. Of this group, approximately 54% said that they “are interested in learning more about the benefits of an outsourced approach” despite their use of an investment consultant.
Reasons for this claim, according to poll’s respondents, center around increased investment complexity (52%) and due diligence requirements in managing asset managers (43%), this according to a press release issued Tuesday.
"What we're seeing is an affirmation among those responsible for managing assets of nonprofits that the recent market conditions have continued to highlight the benefits of an outsourced model," said Carolyn McLaurin, a vice president and managing director of SEI's nonprofit group, said in the announcement. "In recent years, we've seen the investment process take on tremendous complexity and those charged with preserving and growing these resources are exploring the best options for investment management.”
Additional challenges facing investment committees include a grim global economic outlook (51%) and the impact that the endowment has on overall finances continues to increase (40%).
Solutions for this dilemma, according to the poll respondents, include “aligning investment decisions with overall organizational finances, maintaining liquidity in portfolio(s), cash management and inflation hedging.” Alternately, credit rating protection was ranked as a key topic of concern for higher education institutions and hospitals, as 80% said that it was an issue on their minds.
Currently, the financial services’ institutional group helps to provide innovative solutions to defined benefit plans, defined contribution plans, endowments and foundations. As of June 30, SEI administers $380 billion in mutual funds and pooled assets. It manages $149 billion for its clients.