September 12, 2011

Single Family Offices Look Outside to Fill CIO Function: IPI Survey

Wealth management firms stand to gain new business

business meetingSingle family offices are increasingly hiring outside firms to assume the duties of a chief investment officer, according to a new survey released Monday by the Institute for Private Investors.

Nearly half the single family offices IPI surveyed this summer outsource the CIO function, compared with just a quarter that did so in 2005.

IPI said in a statement that 71 of its 1,100 private investor members responded to the survey. They manage assets for an average of 2.8 generations and 26 family members, and have an average of seven employees on staff. Sixty percent of respondents report assets of more than $200 million, and 20% oversee $1 billion plus.

According to the survey, more than three-quarters of respondents that oversee less than $500 million outsource the CIO function. Mandates to the hired firms involve manager or fund recommendations. The range of duties often includes strategic or tactical asset allocation recommendations, as well as manager selection and monitoring.

In some instances, an outside firm places assets in commingled funds or limited partnerships in order to achieve economies of scale advantageous to both the family office and the firm. 

Investment firms, consultants, wealth boutiques, multi-family offices and even private banks stand to gain assets as the outsourcing trend escalates, according to IPI. “The firms which can most concretely show their ‘value-add’ as shrewd allocators and astute fund pickers will likely prove to be the winners in this race for new business,” Charlotte Beyer, IPI’s founder and chief executive, said in the statement.

Reprints Discuss this story
This is where the comments go.