Stories

Jim Link talks about why clients are increasingly opting to outsource the role of chief investment officer

As markets have grown more volatile and regulatory requirements more complex, the Outsourced Chief Investment Officer (OCIO) business has grown exponentially. Data compiled by Pensions & Investments shows that OCIO assets managed for institutional investors across the globe — under full or partial delegation arrangements — totaled about $2.66 trillion as of March 31, 2022, up 86% vs. 2017.

Jim Link, head of the OCIO division for PFM Asset Management, a subsidiary of U.S. Bancorp Asset Management, recently discussed the requirements of an OCIO, why a client would choose to outsource this role and how clients benefit from a little “lagniappe.”

Jim, let’s start with the easiest question: What does your team do?

In simplest terms, our OCIO team works with institutional clients who need help managing their assets and investments.

We have a diverse set of clients – foundations providing resources on behalf of a charity, pensions paying retiree benefits or insurance companies that need to create returns on their assets to keep rates low for the people they insure.

Each client has a different plan for what they want to do with those assets, and this is where our expertise comes in. We work with them to understand their goals, design a strategy to achieve those goals and manage that strategy for them as their outsourced chief investment officer.

Why would a client want to outsource their CIO rather than keeping that in house?

Primarily two reasons: expertise and time. When a board or leadership team is deciding whether to retain or outsource control over the assets, they’ll be asking a few questions to determine the right path: Does our team have the expertise to manage these assets? Can we afford to hire internal staff to manage? Does it make more sense for leadership to focus on the organization’s mission or more client-facing activities?

PFM Asset Management believes someone who is dedicated to managing institutional assets, if given the right direction by the board, can do a better job than many organizations can do internally.

Isn’t the goal to make as much money as possible?

Well, maximizing return may mean something different for each entity, or even within a single entity.

Here’s an example: An insurance company is using their balance sheet to protect against risk, so they might have three different pools to manage: short-term reserves for current expenses or claims to pay short-term; reserve assets to pay for insurance claims that aren’t known but expected within one to five years; and surplus assets that are not allocated to anything in specific but to hedge against inflation or reduce the cost of insurance.

Each pool has a different risk profile, so we want to maximize return, of course, but may want to invest more conservatively in the short-term reserve and more aggressively in the surplus pool.

The markets over the past year have been a bit volatile – how has that affected the OCIO business?

One thing we work hard at is engaging our clients, educating them.

I’m from the South and in Louisiana they have a Cajun word that describes a little something extra – “lagniappe.” I like to give our clients a little lagniappe, meaning when things happen in the market, we make it a priority to proactively educate them on what happened, what our view is and what we’re doing about it, so they’re not left guessing.

We think an informed client is a good client.

Why would a client choose PFM Asset Management for OCIO services?

We have more than 15 years of measurable results, and we take a balanced approach to developing and executing an OCIO strategy.

Some OCIO providers follow the same formula for all clients; some providers are so bespoke that their strategies have no philosophical underpinning. Our sweet spot is that we have a strong investment philosophy but are flexible on how to implement based on needs of the client.

But one of our biggest differentiators is that, as part of the fifth-largest commercial bank in the U.S., clients have a full suite of products, available from affiliates, that could benefit their objectives – charitable giving and custodial services being two of the most popular. ¹

To learn more about the Outsourced Chief Investment Officer services, visit PFM Asset Management.

¹ Additional products and services are available from U.S. Bank affiliates under separate agreement and fees.

About U.S. Bank
U.S. Bancorp, with more than 70,000 employees and $663 billion in assets as of December 31, 2023, is the parent company of U.S. Bank National Association. Headquartered in Minneapolis, the company serves millions of customers locally, nationally and globally through a diversified mix of businesses including consumer banking, business banking, commercial banking, institutional banking, payments and wealth management. U.S. Bancorp has been recognized for its approach to digital innovation, community partnerships and customer service, including being named one of the 2023 World’s Most Ethical Companies and Fortune’s most admired superregional bank. To learn more, please visit the U.S. Bancorp website at usbank.com and click on “About Us.”

About U.S. Bancorp Asset Management
U.S. Bancorp Asset Management’s core strength and focus is managing investment grade fixed income strategies for institutional clients. A registered investment adviser, it has been providing investment grade fixed income investment solutions since 1982. With more than $166 billion in assets under management as of September 30, 2023, U.S. Bancorp Asset Management is a resource for institutional clients including corporations, healthcare organizations, higher education, public entities and nonprofits. For more information, visit usbancorpassetmanagement.com.

U.S. Bancorp Asset Management, Inc. is a registered investment adviser, a direct subsidiary of U.S. Bank National Association and an indirect subsidiary of U.S. Bancorp. U.S. Bank is not responsible for and does not guarantee the products, services, or performance of U.S. Bancorp Asset Management, Inc.

About PFM Asset Management

At PFM Asset Management LLC we partner with public sector, non-profit and other institutions to build tailored, flexible investment solutions across fixed income and multi-asset strategies. We focus our efforts on liquidity management, investment grade fixed income and outsourced chief investment officer (OCIO) solutions. As of September 30, 2023, PFM Asset Management had more than $166 billion in assets under management and more than $50 billion in assets under administration. For more information, visit pfmam.com.

PFM Asset Management LLC is an investment adviser registered with the U.S. Securities and Exchange Commission and a subsidiary of U.S. Bancorp Asset Management, Inc. U.S. Bancorp Asset Management, Inc. is a subsidiary of U.S. Bank National Association. U.S. Bank National Association is a separate entity and subsidiary of U.S. Bancorp. U.S. Bank is not responsible for and does not guarantee the products, services, or performance of PFM Asset Management LLC.