Spotlight on BDOWA's Outsourced CIO Services

January 2021

Ultra-high-net-worth (UHNW) individuals and families typically have a wide range of investment activities and business interests. As a result, their financial lives are multi-faceted and complex. At the same time, they have too many demands on their time to actively oversee their existing investments, assess new opportunities and explore how to optimize tax exposure across their entire balance sheet.

Just as foundations and endowments have a chief investment officer (CIO) to manage these issues, UHNW families often need someone to provide oversight and advice. Without it, opportunities may be overlooked, risks may go unrecognized or inadequately managed, and serious mistakes can be made.

BDOWA’s outsourced CIO (OCIO) services exist for these very reasons. Our OCIO team provides clients with a wide range of services using a fee-for-service model that helps to avoid potential conflict of interest while giving families comfort in knowing that a trusted expert is looking out for their multifaceted interests.  
 

What are BDOWA’s OCIO services?

BDOWA’s OCIO professionals act as independent consultants for our clients, providing investment guidance and recommendations across all of a client’s investments, accounts, and asset managers. Rather than being a one-size-fits all proposition, our OCIO services can be tailored to each family’s needs and can include the following:
  • Aggregating investment exposures across all accounts and monitoring allocations among investment managers; this provides a holistic view of a client’s investment activities and helps to identify any gaps in exposure or potential overlap among managers/accounts
  • Preparing monthly consolidated reports to identify both high-level and detailed exposures and concentrations
  • Reviewing investment objectives, investment policy statements, performance, and fees for every investment manager; this allows us to assess whether the managers are individually and collectively consistent with the client’s ultimate goals and provide oversight of managers’ adherence to investment policy statements
  • Evaluating and providing guidance on complex investment strategies; this includes performing due diligence on specific private equity, real estate, and other alternative investment opportunities
  • Improving asset allocation and asset location efficiency, reducing overlap and costs
  • Running stress tests to show the risks inherent in a client’s overall portfolio
  • Providing tax and estate planning guidance
 

What are some of the key challenges that BDOWA’s OCIO services address?

One of the OCIO services that our clients find particularly valuable is our ability to identify and monitor potential overlap among their investments, both public and private. This effort can be very time-consuming, because clients often have numerous accounts across various firms and asset managers. Our ability to take a high-level, holistic view can be advantageous from a risk management perspective. For example, if a client has significant exposure to one or more public companies that he or she expects to hold indefinitely, perhaps through large positions in company stock and/or restricted stock options, we may recommend hedging some of that exposure or writing out-of-the-money covered calls to create a current income stream.

Another major challenge for UHNW individuals is that they are constantly presented with opportunities to invest in private deals and often don’t have the time to evaluate them appropriately. We conduct due diligence on specific investment opportunities for our OCIO clients, providing expert advice on why we think some investments are worth pursuing and helping to steer them away from others. An added benefit of this approach: as an independent consultant, we can take the blame for turning down an investment that a client was offered, allowing our client to preserve its long-term relationship with a deal sponsor while declining to participate in the current opportunity.
 

How do OCIO services strengthen a client’s investment process?

We bring additional discipline and objectivity to our clients’ investment and wealth planning processes. This may include creating an investment policy statement and other documentation that can help to reduce risk and bring more rigor to the investment process. This can help clients expand their range of potential investment opportunities.

In addition to our deep understanding of both fundamental and quantitative investment strategies in public equities and fixed income, we have deep experience in private credit, real estate, and private equity. Our knowledge of private markets, combined with our visibility into our clients’ cash flow needs, puts us in a unique position to advise clients. For example, when liquidity in the private market is scarce and the market is offering attractive premiums, we may recommend that our clients capitalize on these opportunities.
 

What resources does BDOWA bring to OCIO relationships that might not be obvious?

Our team of OCIO professionals identify opportunities and risks across a client’s investments and recommend how to address them in ways that would not be possible for just any individual investment manager. We can do this because of our team’s expertise, our ability to tap into internal and external resources to address the critical aspects of investing in a given industry, and our nuanced knowledge of deal structures and tax matters. In addition to our internal expertise in investment management, private investing, deal structuring and tax advisory work, we are also able to leverage our network of external experts.

For more information on BDOWA’s OCIO services and how we can bring clarity and oversight to your comprehensive financial situation, please contact your BDO Wealth Advisor.