One common model is to outsource all decision making including asset allocation, manager selection and monitoring.
[16] In some quarters discontent has been voiced about investment outsourcing firms which allocate client capital to proprietary products charging a second layer of fees.
These groups wanted to make all important decisions themselves, and therefore they looked to the consultants only for recommendations, especially regarding asset allocation and manager selection.
On the other hand, "critics assert that consultants suffer from a lack of competence as portfolio managers, and that their experience with the administration of a fund is nonexistent.
"[20] Others have raised concerns about the possibility for conflicts of interests when consultants attempt to move into the outsourced CIO business.
[21][22] British advisory firm Allenbridge Epic, after surveying 11 OCIOs, concluded that several lacked transparency and suffered from conflicts of interest.
Three investment managers who had worked for IBM's pension fund left the company and formed SASCO Capital.
In November 1994 General Dynamics became the first client when its treasurer formed a new outsourced investment firm, Fiduciary Asset Management.
[25] Other early examples of pension fund investment outsourcing included Brown & Williamson, Weyerhauser, Maytag, ADM and K-Mart.
The Board of Trustees hired Lee Partridge, who created a firm called Integrity Capital, as their "outsourced CIO" in 2009.
Internal research prepared for San Jose estimated that an outsourcer would charge between 0.3% and 1.0% to manage their $2.646 billion plan but thought it would be recovered through higher returns.
In 1987 Owens-Illinois’ investment management subsidiary, Harbor Capital Advisors, launched five mutual funds targeting defined contribution plans.
In 1971 Commonfund was created as a result of a Ford Foundation funded study which found that small endowments chronically underperformed.
The fees charged by endowment style outsourced managers vary widely based upon a number of factors including size and complexity.
The primary difference stems from the experience and expertise that endowment-style firms usually have in areas such as hedge funds, private equity and real assets.
An analysis of Commonfund Asset Management's Form ADV Part 2 filing with the SEC for a hypothetical $1 billion account with a 50% equity allocation, 30% in hedge funds and 20% in fixed income would result in total management fees of 85 basis points plus an unspecified level of carried interest.