What is a CIO and do I need one?
A CIO stands for a Chief Investment Officer (as well as Charitable Incorporated Organisation, but we’re not going to talk about those here).
A Chief Investment Officer organises a portfolio full of lots of different investments and funds. Their argument is that they can identify ‘best of breed’ managers, for which they charge a fee on top of the underlying managers’ charges.
Many investment consulting firms offer this service in what is known as an Outsourced CIO. It is a great and profitable business model, retaining the client to ongoing fees. Most Independent Financial Advisers operate in a similar way to outsourced CIOs (think of St James’ Place, recently in the news over heavy charges) because of the quarterly fees they receive for advice to charities that is often unnecessary or at best opaque.
Do I need one? Probably not for two reasons:
Most charity investment managers and pooled funds work on exactly the same principle – they buy in specialist funds who they think are very good (often with the benefit of deep research) and put them in your portfolio.
Sometimes these charity pooled funds (typically Charity Authorised Investment Funds or CAIFs) are cheaper for charities because there’s no additional cost, and the management fee is free of VAT too.
When might I use one? If your assets are at the thick end of £100m or more and you had an active, engaged Investment Committee who wanted to be close to what’s going on in their portfolio, yet not responsible for delivering it themselves, then and a OCIO might be helpful. However, you’d want to be sure that you’re getting value for money over a standard CAIF (usually with about 0.6% - 0.8% fee), and that’s something you’re going to have to do yourself.
At Yoke, we do not operate as an OCIO as we prefer minimise the cost to charities with a much simpler approach. If you would like to understand more, please contact us for a chat.