By Brian A. Schroeder, the founder of OCIO Monitor, a specialty consulting firm that provides due diligence of investment consultants and outsourced chief investment officers.



I write what others are thinking but cannot publicly say. It's a rare freedom in this highly conflicted industry because I am not paid by Wall Street, consultants, asset managers, OCIOs, etc. Asset owners and plan sponsors pay me for objective and unconflicted analysis.

The original GIPS for asset managers works well because categorizing specific mandates and strategies creates an apples-to-apples comparison. Better yet, unique client circumstances have little impact. Finally, specificity limits asset managers' ability to "game the system" making results falsely appear better.

These beneficial aspects are absent with the proposed GIPS-for-OCIOs. In fact, it will also create mal incentives for how OCIOs treat their clients.

Why GIPS-for-OCIOs can only Fall Short

I estimate a 90% chance GIPS-for-OCIOs, once amended, will be foisted upon the industry. OCIOs that don't comply will likely be viewed with suspicion as some OCIO search consultants have publicly declared they will only include OCIOs in future searches that are "GIPS compliant." Adopt or banishment!

It will fall short because asset owners will be relying on manipulated data for comparison within arbitrarily defined categories for clients that all have unique circumstances. Sadly, it will never be apples-to-apples nor free of gaming.

This critique is not a purist view nor the fallacy of calling for perfection. Rather, the proponents of this movement must come to realize some things cannot be so easily measured and boxed for comparison. It's a bridge too far.

But if plan sponsors are not aware of these many shortcomings when using GIPS-for-OCIOs data, they will be led to false conclusions.

There will be Costly Decisions by Asset Owners- An Example

At the heart of the GIPS-for-OCIOs movement is a conflation between returns and an OCIO's value-add. Simple returns are "skin deep" and hardly begin to explain an OCIO's value-add.

If a client's circumstances and guidelines result in "lower" relative returns compared to its arbitrarily defined GIPS peers, a client may wrongly fire their incumbent OCIO even though the OCIO adds value. The client then hires an OCIO that has engaged in gaming data and classifications to puff-up returns despite producing negative added value.

"Bad and unethical" OCIOs will likely be replacing "good and ethical" ones.

Jumping from the frying pan into the fire will happen... repeated ad infinitum.

About the Author:

Brian A. Schroeder is the founder of OCIO Monitor, a specialty consulting firm that provides due diligence of investment consultants and outsourced chief investment officers. He has over 30 years of investment experience, as both an institutional manager and consultant.


He is the leading objective and unbiased due diligence provider on behalf of institutional plan sponsors. He has worked for pensions, foundations and endowments with assets up to $15 billion. Besides quantitatively determining their value-add and discovering behavioral finance heuristics, he is likely the leading expert in benchmarking and performance reporting transparency. He has been consulted by academics and recently presented to the Securities Exchange Commission’s Division of Exams’ investigators on how to spot performance reporting fraud when conducting routine firm inspections.

Schroeder has spoken at the International Foundation’s Trustee Master's Program, the Investments Institute, and the ISCEBS Symposium. In July 2014, Benefits Magazine published his article “Multi-balanced Model: The Missing Link in Investment Approaches?” and, in May 2019, “3 Simple Strategies for Adopting a Passive Investment Consulting Approach” and, in July 2020, “Investing in Response to the Covid-19 Response.”

His analysis is novel by quantitatively scoring the value-add of investment consultants and OCIOs in their five main duties- strategic asset allocation, tactical asset allocation, rebalancing, active manager hiring, and active manager firing.

Schroeder has a Bachelor of Arts degree in economics and a Master of Science degree in financial analysis. He served for 3 years on the Riverton, Utah Committee for Economic Development and is a volunteer at the Salt Lake City YWCA.