GSAM says the catalysts behind the shift to OCIO among larger schemes are more strategic in nature. Image: Sankai via iStock
The growing adoption of outsourced chief investment officer (OCIO) models among UK pension schemes is being driven by a combination of governance challenges, market volatility and evolving investment needs, Goldman Sachs Asset Management (GSAM) says.
Speaking to Professional Pensions, GSAM co-head of Europe, the Middle East and Africa institutional business Chloe Kipling said the trend, once largely confined to smaller schemes, is now gaining traction among some of the UK's largest pension funds.
"If you look back five or ten years, OCIO was typically the preserve of smaller schemes," Kipling explained. "But over the past three to four years, we've seen larger schemes – including those with substantial in-house teams – increasingly consider outsourcing."
GSAM has been among the handful of firms involved in some of the largest outsourcing deals globally. In September, the firm was appointed by various pension entities and a captive insurance company related to Shell and its subsidiaries to manage a $40bn (£29bn) OCIO brief.
Other mandates it has won include a £23bn brief for the trustees of the BAE Systems Pension Scheme and BAE Systems Executive Pension Scheme.
Why the shift?
Kipling said motivations differ by scheme size. For smaller schemes, she said the drivers were often governance and operational challenges, regulatory complexity and the need for access to new asset classes, for example asset-backed finance.
For larger schemes, she said the catalysts were more strategic. "Many corporates are asking whether managing pensions is really a core business," Kipling noted. "As schemes mature, asset allocations have shifted away from equities and private markets towards cashflow-driven strategies and liability hedging. That requires a different skill set – and for some, outsourcing is the logical next step."
Succession planning has also played a role. "Where a CIO retires and there's no clear successor, OCIO can be an elegant solution," she added.
Flexibility and bespoke solutions
But Kipling stressed that outsourcing does not mean relinquishing control. "One of the myths is that you hand everything over and lose influence. In reality, trustees can focus on strategic decisions – journey planning, risk appetite – while delegating day-to-day implementation."
She noted GSAM could offer a highly flexible approach, from fully delegated fiduciary models to hybrid structures involving consultants and/or independent oversight providers. Kipling explained: "Every client is different – we don't use a building-block approach. Solutions are customised to each scheme's objectives and constraints."
GSAM's OCIO business now oversees more than £300bn globally and is supported by a multi-asset solutions team of over 300 – but Kipling said the team is still growing, noting the firm's hire of Carolyn Schuster-Woldan as a managing director in its UK fiduciary management/OCIO team in September as an example.
Kipling said such hires underline GSAM's commitment to growth. She said: "We believe more UK pension assets will move into OCIO, and we want to be ready."
