CFA Institute Releases Draft Guidance Statement for OCIO Strategies

ACA Group

[author: Elena Mckee-Dabbs]

Only about one quarter of all Chief Investment Officer (OCIO) firms claim compliance with the Global Investment Performance Standards (GIPS®), largely because firms feel like the standards don't fit their business model. This leads to a lack of standardization and comparability of investment performance across OCIO managers.

In an effort to support OCIOs, the CFA Institute recently released an Exposure Draft Guidance Statement for OCIO Strategies addressing OCIO-specific performance challenges. The topics covered in this exposure draft include how to apply the GIPS standards to OCIO portfolios and how to define OCIO composites, benchmark selection, legacy assets, and fee transparency.

Key takeaways of the guidance statement

This guidance will apply to any firm that has an OCIO Strategy, which is defined as providing investment advice and investment management services on an outsourced basis for Total Portfolios of institutional investors, such as pensions, endowments, and foundations.

Composite Construction
The CFA Institute will mandate a strict composite structure for the first time since the GIPS standards were released. Although firms are allowed to create other composites, any firm with an OCIO Strategy must create ten mandatory composites if applicable.

Required OCIO Composites Allocation to Liability-Hedging Assets Allocation to Growth Assets
Liability-Focused Aggressive 0-20% 80-100%
Liability-Focused Moderately Aggressive 21-30% 70-79%
Liability-Focused Moderate 31-50% 50-69%
Liability-Focused Moderately Conservative 51-75% 25-49%
Liability-Focused Conservative 76-100% 0-24%
Required OCIO Composites Allocation to Risk-Mitigating Assets Allocation to Growth Assets
Total Return Objective Aggressive 0-20% 80-100%
Total Return Objective Moderately Aggressive 21-30% 70-79%
Total Return Objective Moderate 31-50% 50-69%
Total Return Objective Moderately Conservative 51-75% 25-49%
Total Return Objective Conservative 76-100% 0-24%

OCIO firms often struggle with how to treat legacy assets within composite performance. The proposed guidance offers three options when considering these inherited assets:

  1. Exclude when the legacy assets materially affect the ability of the firm to implement its intended OCIO Strategy. A firm may consider the amount of legacy assets and type of legacy assets when making this determination.
  2. Include regardless of the amount or type of legacy assets because the firm determines that it can still manage these portfolios to its intended OCIO Strategy.
  3. Include the portion of the portfolio that excludes legacy assets when this portion is consistent with a Total OCIO Portfolio.

The CFA Institute wants your feedback

The exposure draft is open for public comment until November 20, 2023. Below are some of the questions the CFA would like feedback on:

  • Is it clear when a firm must apply the Guidance Statement for OCIO Strategies?
  • Do you agree with the use of a Required OCIO Composite structure?
  • Do you agree with differentiating liability-focused composites from total return objective composites in the Required OCIO Composite structure?
  • The proposed asset allocation ranges for the Required OCIO Composites have been created based on a widely used set of OCIO indices, which is built to include the most common 60/40 portfolio in the middle of the moderate bucket. Do you agree with these ranges, or do you think we should take a different approach?
  • Do you agree with the proposed three options for the treatment of legacy assets?
  • Do you agree with requiring both gross-of-fees and net-of-fees returns for Required OCIO Composites?

We would encourage all firms with OCIO strategies to read the full exposure draft and submit your comments to the CFA institute at

The CFA will be hosting a webcast to discuss the exposure draft Thursday, September 28th from 1:00 – 2:30 pm ET, and we would encourage OCIO managers to attend to hear more about the exposure draft.

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ACA Group

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