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The defined contribution market is beginning to experiment with the so-called outsourced chief investment officer (OCIO) plan management model in response to an increasingly complex regulatory environment. The trend is in the early stages, with consultants and asset managers still formulating what their offerings will entail. Some firms are keeping it simple and creating custom multi-manager funds to offer OCIO clients, pledging to deal with manager selection and changes within those funds. Others are going for a broader approach, offering an almost complete outsourcing of plan administration and investment management.
Liana Magner
Dick DaviesOCIO services, which are also known as implemented or fiduciary services, have been growing quickly in the defined benefit marketplace over the last five years. Some consultants say that while the DC OCIO offerings have existed during the same time period as the DB market, the DC OCIO market is not as mature. Consultants estimate that the incipient trend has only gained real traction in the last 18 months, but most consultants agree that it will become a large part of the DC market. "This is only going to grow. We're just tapping into this marketplace," said Liana Magner, senior consultant and partner for Mercer.
The growing regulatory headache has pushed plan sponsors to find new ways to mitigate their fiduciary risk, and OCIO solutions have in turn become more attractive. "One of the benefits of fee disclosure was that it opened plan sponsors' eyes. It made some plan committees uncomfortable that their lack of understanding in...