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Outsourced CIO

Overview


As the market environment grows increasingly complex, and organizational resources evolve, institutional investors are seeking outsourced (OCIO) solutions to help balance strategic priorities and day-to-day decision-making based on their distinct investment objectives. We partner with clients to help them focus on higher level strategic initiatives critical to the overall organization.

Our Philosophy


Every organization has unique investment goals and risk objectives.
We work directly with organizations and their staffs, investment committees, actuaries, record-keepers and consultants to understand their unique objectives.
Dedicated OCIO resources help plans focus on strategic decision-making.
Delegating decisions to the OCIO partner allows clients to focus on strategic decisions and alleviates many day-to-day tasks (e.g., reporting, investment strategy implementation, rebalancing the portfolio and coordination of services providers).
A robust risk management strategy is critical.
We develop risk-management strategies based on clients’ stated objectives, leveraging sophisticated analytics and dynamic portfolio monitoring that provide our clients transparency and oversight throughout the investment process.

Our Approach: How We Partner With Clients


By combining the depth of our expertise with the breadth of our platform, we provide tailored outsourcing programs to meet our clients’ unique investment objectives.

Diagnose
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We seek to understand each client’s unique needs, including investment objectives, risk tolerance, organization-specific considerations, investment constraints and liquidity requirements.

Construct
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We design an integrated investment strategy tailored to each client’s stated objectives and level of outsourcing needs. We also leverage an open architecture platform with an extensive bench of external managers.

Monitor
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We employ a proprietary, fully-integrated risk management system to manage the portfolio on a daily basis and adjust exposures based on evolving market dynamics. We conduct ongoing risk management through portfolio stress testing, risk modeling and monitoring, and liability modeling for pensions starting at the participant level.

Key Differentiators


Enhanced efficiency and scale

Delegating decisions to the Outsourced CIO (OCIO) partner allows clients to focus on strategic decisions and alleviates many day-to-day tasks, which drives increased scale. In addition, accessing managers at scale can lower transaction costs and drive potential savings.

 

Complementary expertise and nimble implementation

Market proximity can yield faster and more informed strategy implementation, which improves potential risk-return trade-offs.

 

Deep bench of expertise

With dedicated professionals across the globe, we have extensive experience providing outsourcing solutions. In addition, dedicated liability management is achieved through the use of a custom liability benchmark and funded status attribution.

Comprehensive oversight

Clients can benefit from having one manager with visibility across all assets and liabilities to allow for daily portfolio monitoring.

 

Robust risk management

A proprietary risk-aware investing approach focuses on allocating risk rather than capital to build portfolios that are diversified and appropriately balanced.

Examples of Our Partnership with Clients


Client Description

A European sovereign wealth fund with assets designated for spending on local private investments.

 

Client Objective

GSAM initially advised the client on an approach to divide the assets into three portfolios:

  • Cash portfolio for immediate liquidity needs
  • Buy-and-Maintain credit portfolio for large cash withdrawals
  • Growth portfolio for longer term capital appreciation
GSAM Solution

We were awarded a multi-asset class mandate to manage a portion of the client’s assets on a discretionary basis, taking into account a client-specific restricted security list and environmental, social and governance (ESG) overlays. We manage the portfolio solution with a volatility limit to increase the temporal diversification and Sharpe ratio of the portfolio. The growth portfolio was designed within an absolute return framework based on GSAM’s factor risk budgeting approach that limits exposure to traditional asset classes.

Client Description

A UK Pension Scheme.

 

Client Objective

The client’s objective was to achieve long-term growth of assets relative to liabilities, within a Journey Plan framework, while seeking to de-risk over time.

 

 
GSAM Solution

We oversee every aspect of the investment strategy including:

  1. Defining a Journey Plan and strategic asset allocation
  2. Managing the return-generating and liability-hedging assets
  3. Rebalancing and selecting best-in-class managers
  4. Collaborating with the Scheme’s service providers such as the custodian, actuary and managers

We advise the trustees on long-term objectives, investment strategy and constraints. We also offer guidance on non-investment aspects such as the Statement of Investment Principals and fulfillment of regulatory requirements. We seek to meet the trustees’ strategic objectives through a well-diversified portfolio based on a range of potential economic scenarios and bolstered by a customized liability hedging strategy that matches liability interest rate and inflation risk as closely as possible.

Client Description

A large professional services firm with multiple pension plans. 

 

Client Objective

The client sought a discretionary manager to create a liability-driven, outsourced portfolio to manage surplus risk for multiple pension plans. The plans had varying levels of funded status and unique objectives and constraints.

GSAM Solution

We executed a customized solution for each plan. We focused on mitigating surplus risk by diversifying across return-generating assets and directed attention to finding the optimal mix of liability-matched investments. We maximized the probability of exceeding long-term investment objectives by adding tactical shifts based on proprietary forward-looking views.

Client Description

A large UK corporate pension with an existing private markets portfolio.

 

Client Objective

With a portfolio of over 40 fund investments, the client was seeking a partner to provide portfolio monitoring and reporting as well as assistance with various tasks related to operational due diligence.

GSAM Solution

We provide the client with advisory services and recommendations, including the analysis of the portfolio’s performance through benchmarking, investment exposure, analytical support using our proprietary tools, and cash flow analyses. This monitoring and reporting enables us to continually advise the client on new commitments designed to complement their existing portfolio.

To help the client gain a more holistic understanding of their broader alternatives portfolio, we engage in ongoing knowledge transfer, share of information on investments, and hold regular meetings to discuss portfolio progression, manager issues, and market trends. 

Client Description

A large European pension plan making its first allocation to private equity.

 

Client Objective

The client had no prior experience in private equity and was seeking to build in-house expertise while making an initial allocation to the asset class.

GSAM Solution

We built a strategic relationship with a focus on knowledge transfer and capability building. The client made a series of commitments to our global fund-of-funds program, and we have continued to exchange ideas and assist the client in building out their private equity platform by:

  • Conducting ongoing training and maintain an open dialogue regarding the key aspects and criteria for evaluating managers and constructing a portfolio.
  • Holding monthly conference calls and hosting their professionals in our offices for observation of our investment process and to work alongside us in diligence sessions.
  • Providing introductions and access to underlying managers, as well as the broader Goldman Sachs network and research.

Over time, the client’s internal team has taken more responsibility for investing the private equity allocation. 

Awards


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