The chief investment officer (CIO) is a job title for the board level head of
investments
Investment is the dedication of money to purchase of an asset to attain an increase in value over a period of time. Investment requires a sacrifice of some present asset, such as time, money, or effort.
In finance, the purpose of investing is ...
within an organization. The CIO's purpose is to understand, manage, and monitor their organization's portfolio of
assets
In financial accounting, an asset is any resource owned or controlled by a business or an economic entity. It is anything (tangible or intangible) that can be used to produce positive economic value. Assets represent value of ownership that can ...
, devise strategies for growth, act as the liaison with investors, and recognize and avoid serious risks, including those never before encountered.
Usage in the United States of America
According to a press release on October 22, 2008, the
United States Department of the Treasury
The Department of the Treasury (USDT) is the national treasury and finance department of the federal government of the United States, where it serves as an executive department. The department oversees the Bureau of Engraving and Printing and ...
named James H. Lambright to serve as the interim chief investment officer for the
Troubled Asset Relief Program
The Troubled Asset Relief Program (TARP) is a program of the United States government to purchase toxic assets and equity from financial institutions to strengthen its financial sector that was passed by Congress and signed into law by President ...
. "He will provide counsel to Secretary Henry M. Paulson, Jr. and Interim Assistant Secretary for the Office of Financial Stability
Neel Kashkari
Neel Tushar Kashkari
Whenever the role of the chief investment officer is active within an insurance company (either life or non-life) and/or pension fund, the role is to manage and coordinate the investment, liquidity (treasury) and/or asset and liability management in order to optimize investment performance within the risk appetite as defined by actuarial studies of risk management guidelines. The role of a chief investment officer within a corporate pension organization is similar, although the end-goal for the chief investment officer is often not profit, but matching the organization's pension assets with its pension liabilities. Chief investment officers at endowments and foundations also consider the liabilities of the organization, with an added focus on liquidity and alternative assets.
Chief Executive Officer
A chief executive officer (CEO), also known as a central executive officer (CEO), chief administrator officer (CAO) or just chief executive (CE), is one of a number of corporate executives charged with the management of an organization especial ...
for Hirtle, Callaghan & Co., pioneered the outsourced chief investment officer (OCIO) model, which serves family groups and organizations that do not employ fully staffed investment departments. For his OCIO innovations, Hirtle has been dubbed the “" Oracle of Outsource".
Current OCIO models
The model by which outsourced CIOs service clients is still evolving in this nascent business. The most common model is to outsource all decision-making including asset allocation, manager selection and monitoring. The OCIO reports back to the client, but the burden is largely lifted from the client and placed on the new provider. Among OCIOs utilizing this approach, there is a "continuum of outsourcing approaches and providers: manager-of-manager programs; funds-of-funds; former CIOs offering a diversified model portfolio". The common thread amongst these approaches is the use of commingled funds or model portfolios which creates
economies of scale
In microeconomics, economies of scale are the cost advantages that enterprises obtain due to their scale of operation, and are typically measured by the amount of output produced per unit of time. A decrease in cost per unit of output enables ...
for the OCIO.
A different model is pursued by a small subset of the OCIO universe. The members of this group work alongside the client's staff – not as a replacement to them. According to investment industry newsletter FundFire, "An increasing number of CIOs see outsourcing not as a threat to their job, but as a source of complementary expertise and advice, as well as investment opportunities." Like much of the nomenclature around the OCIO business, this more customized, bespoke solution does not yet have a widely recognized name. Fiduciary Research (FRC), an OCIO who oversees about $9 billion on behalf of a small list of pension fund clients, calls itself an iCIO for integrated chief investment office.Sturock, Tim. "Institutions Split over Hybrid CIO/OCIO Model" FundFire, June 5, 2013.