What Nonprofit Organizations Should Consider When Choosing the Right OCIO

As more nonprofits turn to Outsourced Chief Investment Officer (OCIO) services to manage their endowments and investment portfolios, selecting the right OCIO partner is extremely important. The right partner can help you optimize your financial resources and ensure long-term sustainability. Here are some key factors to consider when choosing an OCIO:

1. Experience
   Nonprofits have unique financial and governance structures, and it’s essential to choose an OCIO with extensive experience in the nonprofit sector and the specialized knowledge required to manage endowment portfolios. Look for an OCIO that understands your goals and can develop strategies to meet them, whether it's preserving capital, generating income, or supporting future growth. The more experience they have working with nonprofits, the better they’ll understand how to align your financial strategy with your organizational mission.
2. Alignment with Your Mission and Values
   Your mission and values should guide every decision you make, including who you choose to manage your financial resources. An OCIO partner should understand and respect these guiding principles from the start, working closely with you to develop strategies that support your goals while remaining true to your organization’s broader objectives. A strong OCIO relationship is built on customization, not one-size-fits-all solutions. They should create a tailored approach that complements both your financial needs and the overall direction of your nonprofit.
3. Proven Track Record
   When choosing an OCIO, one of the key factors to evaluate is a firm’s ability to construct portfolios that align with your organization’s risk tolerance and financial objectives. A successful OCIO should have a history of delivering results that are competitive with relevant benchmarks and other OCIOs, ensuring your portfolio performs within expectations while managing risk effectively. It’s important to ask for references or case studies from other nonprofit clients, particularly those with similar risk profiles. Don’t hesitate to request references to gain insight into how well the OCIO has managed portfolios through different market environments. Their experience and ability to consistently meet your organization’s specific goals, not just outperform broad market indices, will give you confidence in their ability to be a reliable long-term partner.
4. Comprehensive Risk Management
   Managing risk is a critical element of any investment strategy, particularly for nonprofits that rely on steady financial resources to fund their missions. A strong OCIO should employ a disciplined and proactive risk management approach, ensuring that your portfolio is structured to reflect your organization's specific risk tolerance and financial goals. The goal is not just to mitigate risk, but to optimize your portfolio’s performance relative to your risk profile, helping you navigate market volatility without exposing your organization to unnecessary risk.
5. Managing Committee Risk
   Nonprofit investment committees face challenges such as indecisiveness, dominant personalities, and potential conflicts of interest that can impact decision-making. An effective OCIO partner can help mitigate these risks by fostering accountability, explaining conflict-of-interest policies, and keeping the committee focused on controllable factors like asset allocation, risk diversification, and expense management. By providing unbiased guidance and emphasizing strategic priorities, an OCIO helps committees avoid common pitfalls and stay aligned with the nonprofit’s mission and financial goals.

6. Assistance with Investment Policy Statement (IPS) and Regulatory Compliance
   A well-structured Investment Policy Statement (IPS) is fundamental to managing a nonprofit’s investments effectively. The right OCIO partner can help craft or update this document to ensure it reflects your goals, risk tolerance, and ethical standards. Additionally, the financial landscape is always changing, and an OCIO should stay on top of regulatory updates that could impact your organization. They can ensure compliance with new laws and help your nonprofit avoid unnecessary legal or financial risks.
7. Transparent Fees
   Understanding how your OCIO charges for their services is critical. Look for a partner with a transparent and competitive fee structure, and make sure their fees are aligned with the value they deliver. Compare the costs against the long-term benefits of outsourcing your investment management. A high-performing OCIO can often enhance returns, reduce risk, and save your organization time, offsetting the cost of their services.
8. Communication and Reporting
   Open and frequent communication is key to a successful OCIO partnership. Make sure you understand how often they will report on your portfolio’s performance and how accessible they are to your team. The best OCIOs provide clear, detailed reports without overwhelming your board with technical jargon. They’ll keep you informed and engaged while handling the complexities of managing your investments.

Conclusion
Choosing the right OCIO partner can have a transformative impact on your nonprofit’s financial stability and future. By focusing on factors like nonprofit expertise, alignment with your mission, proven performance, and strong communication, you can find an OCIO that doesn’t just manage your investments but becomes a trusted partner in helping your organization thrive.