Why Delegating to an OCIO Can Strengthen Your Pension Governance

In the video, CAPTRUST breaks down how a 3(38) Investment Manager—often branded as an outsourced chief investment officer (OCIO)—assumes day-to-day discretion over plan assets so sponsors can focus on broader governance. An OCIO typically drafts or refreshes the investment policy statement, monitors and trades the portfolio, vets underlying managers, and shifts asset allocations in real time when markets move. For many organizations with lean staff or complex liabilities, that level of hands-on management translates into quicker execution, tighter risk controls, and clearer performance benchmarking.

Potential Advantages

• Broader access to diversifying asset classes and specialist managers
• Institutional-grade risk-management tools that help buffer volatility
• Robust, transparent reporting that keeps committees audit-ready
• Faster tactical moves—without the scheduling delays of quarterly meetings

Key Considerations Before You Hire

OCIO oversight isn’t one-size-fits-all. Plans with well-resourced investment committees may prefer to retain direct control, and sponsors who thrive on tactical decision-making could view full discretion as a drawback. Before signing an OCIO mandate, CAPTRUST recommends comparing fee structures, service models, experience with defined-benefit liabilities, and cultural fit with your existing governance process.

Next Steps

A thoughtful RFP and due-diligence process will clarify whether an OCIO aligns with your funding goals, risk appetite, and internal bandwidth. CAPTRUST’s institutional advisory team can guide you through provider comparisons, mandate design, and ongoing oversight—so your pension strategy stays on track today and over the long term.

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If you sponsor a defined benefit retirement plan, you may already be familiar with the term 3(38) investment manager, or the acronym OCIO, which stands for outsourced chief investment officer.

But you might not know that these two terms describe the same type of discretionary relationship. An OCIO is a professional advisor, or an advisory firm, hired by a retirement plan sponsor to manage its investment portfolios and make strategic investment decisions on the organization’s behalf. This can be especially helpful to organizations with limited staff and adequate investment experience or highly specialized investment needs. But it’s important to know the benefits and considerations before deciding if an OCIO is the right choice for your pension plan. Typically, OCIOs provide day-to-day management of an organization’s investment program. They have investment discretion and are directly accountable for plan performance. That’s why you might also hear the OCIO relationship described as discretionary portfolio management, or simply discretion.

OCIO services can include:

• Investment policy statement development
• Portfolio analysis, management, and trading
• Research and selection of investment managers
• Tactical or strategic asset allocation

For many organizations, delegating these critical tasks to a trusted partner is a welcomed sigh of relief.

OCIOs offer many potential benefits:

• Increased access to investment opportunities, which can improve diversification
• Increased access to advanced risk management practices, which can help the organization navigate market volatility
• Improved benchmarking of your plan performance, plus improved reporting and transparency.
• Real-time review and execution of tactical changes

Despite these many benefits, engaging a discretionary manager might not be the right move for every organization. For instance, pension plan sponsors with strong internal investment committees might not require these services, and those that prefer to have direct control over their investment decisions could find an OCIO less appealing.

If you do decide to engage a professional, due diligence is key. Research multiple firms. Explore their fees, reporting schedules, track records, experience managing pension assets, and stability. Institutions with highly specialized investment requirements will require an OCIO with robust industry expertise to meet their specific needs. You may also want to gauge how well the OCIO will integrate with your organization’s existing governance, structure and communication channels.

Ultimately, the decision to hire an OCIO should be based on careful evaluation of your organization’s needs, objectives and resources. Making a well-informed decision can lead to more efficient and effective portfolio management that is better aligned with your institution’s short and long-term objectives.

For help navigating the OCIO landscape, call CAPTRUST. Our nationwide team of institutional advisors can help you decide the next steps forward.

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As a member of your organization’s Retirement Plan Investment Committee, your job is to make sure the assets of your retirement plan participants are invested wisely. But how do you go about this important task? One key step is to create an Investment Policy Statement (IPS).

An IPS is a formal document that explains the guidelines and procedures for how to manage an organization’s investment portfolio. It gives clear directions to finance staff and committee members.

Typically, an IPS will define the following for an organization:

• Investment goals
• Risk tolerance
• Asset allocation
• Other investment related policies

Having a written IPS provides several benefits. One of the biggest benefits is that it helps ensure consistency and accountability in the process, and how the portfolio is managed over time, regardless of who is managing it. An IPS may also promote better long-term investment performance by establishing a disciplined process up front.

It can help prevent emotion based or reactionary investment decisions that might undermine the portfolio success. The policies contained in an IPS help the organization stay on track, even when markets are volatile.

So, what exactly goes into an IPS? First, you’ll want to outline the organization’s investment objectives. Is the overall goal to preserve capital, generate income, or grow the portfolio’s value over time? What are the long-term and short-term goals you want to achieve? Next, make sure to specify your time horizon and risk tolerance. Then, give details about asset allocation. What percentage of the portfolio should be invested in stocks, bonds, alternative investments, and other asset classes?

Your IPS should also include policies regarding diversification, liquidity needs, rebalancing, and selecting and monitoring investment managers. It’s a good idea to document any investment restrictions, including companies or sectors of the economy, that are off limits from an investment point of view, or that conflict with the mission or values of the organization.

Lastly, be sure to explain the investment decision making process. reporting requirements, and oversight procedures. Some organizations also choose to include their conflict-of-interest policy in their IPS. Keep in mind that creating an IPS is not something to be done hastily. It’s a thoughtful and sometimes lengthy exercise that should involve lots of key stakeholders, including investment committee members, senior leadership, staff, and your professional advisors.

Once you have created a draft of your IPS, it will need to be approved by your board of directors or other governing body. It should then be reviewed and updated on a regular basis, typically once a year. By documenting investment objectives, policies, and procedures, an IPS promotes continuity, accountability, and better investment outcome.

That’s why it’s a crucial part of effective long term portfolio management. For help developing an IPS for your organization, call CAPTRUST. We can help.

CapFinancial Partners, LLC (doing business as “CAPTRUST” or “CAPTRUST Financial Advisors”) is an Investment Adviser registered under the Investment Advisers Act of 1940. However, CAPTRUST video presentations are designed to be educational and do not include individual investment advice. Opinions expressed in this video are subject to change without notice. Statistics and data have come from sources believed to be reliable but are not guaranteed to be accurate or complete. This is not a solicitation to invest in any legal, medical, tax or accounting advice. If you require such advice, you should contact the appropriate legal, accounting, or tax advisor. All publication rights reserved. None of the material in this publication may be reproduced in any form without the express written permission of CAPTRUST: 919.870.6822 © 2024 CAPTRUST Financial Advisors.

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Take this moment to make a mental list of all your assets – your home, your car, your wealth, your investments. Now, consider what will happen to each of these assets at your death. Not sure? That’s why it’s important to have a written estate plan for all the things you’ll leave behind.

Drafting an estate plan is one essential task that most people avoid, yet proactive estate planning is the best way to ensure that at your death, your assets are distributed according to your wishes. As you develop your estate plan, here are 10 key steps to consider:

1. Compile all necessary documents such as your will, advanced directives and powers of attorney.
   • These documents allow you to make your wishes clear, legally protect the assets you leave behind, and save your family time and money. They also help to guide your family members through key financial and healthcare decisions and potentially stressful times.
2. Confirm your beneficiaries.
   • Make sure all retirement accounts, insurance policies and annuities have primary and contingent beneficiaries that accurately reflect your current situation and intentions. It’s common for people to have outdated beneficiary designations that give account balances to former spouses or to family members that have already passed away. People also regularly forget to update beneficiaries when their minor children become adults. It’s a good idea to confirm your beneficiaries at least once a year.
3. Take advantage of trusts.
   • Two particular types of trust may be advantageous here – a revocable living trust, which is established before death, and a testamentary trust, which is established in your will. Trusts help your loved ones avoid probate costs and delays. They can also help you leverage tax benefits, provide beneficiaries with protection, and govern the private transfer of your assets.
4. Make sure you have sufficient life insurance to meet your family’s needs.
   • You want your loved ones to be able to meet their financial obligations without worry. For help determining how much insurance is enough, talk with your financial or insurance advisor.
5. Separate life insurance from your estate.
   • Keeping your life insurance death benefits in your estate can add a significant amount to your estate total and corresponding tax, unless it is owned in an irrevocable trust such as a testamentary trust.
6. Double check your liquid assets.
   • By confirming you have sufficient liquid assets, you can help ensure that your real estate, business interests and other liquid assets aren’t sold hastily to cover estate taxes or other costs.
7. Consider how your spouse or partner’s estate will interact with your own.
   • Before deciding which assets you will leave to your spouse or partner, it’s important to understand the potential impact to his or her own estate. Depending on your situation, leaving large amounts of money to one person or holding large amounts of joint property may not be the best option.
8. Consider your lifetime gifts.
   • Gift and estate tax legislation changes every year. Stay up to date on recent exemption amounts and take advantage of legislation changes while you are living.
9. If you are a business owner, learn more about key person insurance.
   • Key person insurance protects your business and value of your estate by providing liquidity at a critical time.
10. Make sure you keep things current.
    • Update your estate documents if you move to a new state, change your marital status, have a child, grandchild, or even just change your mind about your goals.

You’ve probably heard the old proverb that nothing is certain but death and taxes. Let this tried and true saying remind you why it’s important to make an estate plan. And when you need help, remember, CAPTRUST is only a phone call away.

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An investment committee helps oversee and manage the growth of an organization’s investable assets. For endowments and foundations, these are usually volunteer positions that carry a significant responsibility. With that in mind, here are a few steps that can help your investment committee thrive.

Begin by establishing clear objectives. This is often done by creating an Investment Policy Statement, or IPS, which serves as a guidepost for the committee and helps to support objective decision making.

The IPS should define the organization’s:

• Investment goals or objectives
• Risk tolerance
• Asset allocation strategy and allowable assets
• Level of discretion assigned to the committee and its advisors

These objectives should be reviewed at least annually to reflect changes in market conditions or budgets. The investment committee may also create the organization’s spending policy and explore strategies such as mission aligned investing. Choose your committee carefully, selecting members who have a solid understanding of financial markets and investment strategies, and who have time to commit to the position.

To ensure fresh perspectives, consider including committee members who represent diversity in their backgrounds and their thinking. The size of your committee depends on the size and complexity of the nonprofit you serve. We recommend avoiding large groups, such as nine or more, since this can make it overly difficult to build consensus.

And always choose an odd number of members to avoid ties when voting. Regardless of any specific responsibilities, all committee members should stay educated on portfolio performance, market trends, and benchmarks. Committee members have a fiduciary responsibility to monitor the organization’s assets and should ask questions and review monthly statements and quarterly reports.

New committee members should be brought up to speed on historical decisions and performance when they join the committee. One of the most important tasks of an investment committee is to keep careful and detailed records. Include all past versions of your IPS, keep meeting minutes that explain your decisions and the reasoning behind them, and take time to document the roles of each committee member.

Communicate regularly with donors, staff, board members, and other committee members to keep them well informed. This includes sharing news of investment performance, New or existing objectives, changes to the committee, and anything else that establishes transparency between your committee and the rest of the organization.

Being part of a nonprofit’s investment committee is an awesome responsibility, in every sense of the word. You’re part of a greater good. And by establishing a strong investment committee, you’re helping create a ripple effect of positive change. For help establishing, optimizing, or restructuring your nonprofit investment committee, call CAPTRUST.

Our financial advisors have the expertise and experience to help.

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Understanding Your ERISA Fiduciary Responsibilities as a Retirement Plan Sponsor

The Employee Retirement Income Security Act (ERISA) categorizes most retirement plan sponsors and their plan committee members as fiduciaries.

A fiduciary is a person who holds a legal and ethical relationship of trust with another person or a group of people.

As a new plan sponsor, one of the most important steps you can take is to engage in fiduciary training. Sponsoring a retirement plan for your employees means you have a fiduciary duty to act prudently and solely in the best interest of planned participants.

Why Consider Fiduciary Training

Early in your journey as a plan sponsor, it’s critical that you understand what it means to be a fiduciary and how to fulfill your fiduciary duties. Fiduciaries are held to a high standard of conduct and the potential consequences of not understanding can be significant.

Fiduciary training will help committee members understand their duties and responsibilities and what good governance looks like. It’s also a great way to minimize risk through education and governance.

While not a requirement, the Department of Labor (DOL) views fiduciary training as a critical component of prudent oversight, and it frequently looks for evidence of training during plan investigations.

CAPTRUST’s Fiduciary Training for New Retirement Plan Sponsors

Whether you’re a new or seasoned retirement plan sponsor, CAPTRUST has a robust team of retirement
industry experts who can help. Our fiduciary training for new plan sponsors is part of our ongoing commitment to service beyond expectation.

In this training, we cover fiduciary duties as required under ERISA, but we also help you understand best practices for managing your new retirement plan beyond what’s legally required for compliance. These best practices help ensure you are fulfilling your obligations as a fiduciary and making decisions in the best interest of plan participants.

We start by defining who is a fiduciary and what their key responsibilities are.

Next, we explore a fiduciary’s duty of prudence, which requires that you continually monitor the investments offered within your plan. Merely providing a range of investment choices is not enough. We also discuss resources and options to support your retirement plan committee.

Then, we dive into your duty of loyalty and impartiality. This is known as ERISA’s exclusive purpose rule. It requires that fiduciaries discharge their duties solely in the interest of participants and beneficiaries, not in the interest of the employer.

Plan sponsors also have a duty to diversify plan investments and a duty to monitor and supervise service providers. Robust training will show you how to evaluate the prudence of any potential vendors and changes to your plan. It will also teach you how to evaluate whether service provider fees are reasonable or not as part of your duty to ensure reasonable costs.

The last piece is your duty to avoid prohibited transactions. To make sure employers are not acting in their own self-interest, ERISA spells out five types of transactions to avoid. These are transactions between the plan and a party of interest. They include money lending, the extension of credit, and the sale, exchange, or leasing of any personal property. Fiduciary training will show you how to make necessary transactions without breaking the rules.

After your initial training, it’s a good idea to consider ongoing sessions in order to build a deeper understanding and stay informed of current trends, updated regulations, and litigation outcomes. But remember, throughout your journey as a retirement plan sponsor, CAPTRUST is here to help.

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Creating a Nonprofit Investment Policy Statement

If you’re part of the team managing investments for a nonprofit, your job is to make sure the organization’s money is invested wisely to support its missions and programs in perpetuity. But how do you go about this important and seemingly complex task? One key step is to create an investment policy statement (IPS).

An IPS is a formal document that explains the guidelines and procedures for how to manage an organization’s investment portfolio. Typically, an IPS will define the organization’s investment goals, risk tolerance, asset allocation, and other key policies. It gives clear directions to finance staff and investment committee members.

Having a written IPS provides several benefits. Most importantly, it helps ensure consistency and accountability and how the portfolio is managed over time, regardless of who is managing it. An IPS may
also promote better long-term investment performance. By establishing a disciplined process upfront, it can help prevent emotion-based or reactionary investment decisions that might undermine the portfolio’s success. The policies contained in an IPS act as a guide to help the organization stay on track, even when markets are volatile.

So what exactly goes into an IPS? There are several key elements. First, you’ll want to outline the organization’s investment objectives. Is the overall goal to preserve capital, generate income, or grow the portfolio’s value over time? What are the long-term goals, and are there other, shorter-term goals you want to achieve?

Next, make sure to specify the organization’s time horizon, and risk tolerance. Then give details about asset allocation. What percentage of the portfolio should be invested in stocks, bonds, alternative investments, and other asset classes?

Your IPS should also include the organization’s policies regarding diversification, liquidity needs, rebalancing the portfolio, and selecting and monitoring investment managers. It’s a good idea to document any investment restrictions as well, including companies or sectors of the economy that are off limits from an investment point of view or that conflict with the mission or values of the organization.

Lastly, be sure to explain the investment decision-making process, reporting requirements, and oversight procedures. Some organizations also choose to include their conflict-of-interest policy within their IPS.

Keep in mind that creating an IPS is not something to be done hastily. It’s a thoughtful and sometimes lengthy exercise that should involve lots of key stakeholders, including investment committee members, board members and staff, as well as professional advisors.

Once you have created a draft of your IPS, it will need to be approved by your board of directors or other governing body. And it should be reviewed and updated on a regular basis, typically once a year or whenever there’s a major change in the market environment.

By documenting investment objectives, policies, and procedures, an IPS promotes continuity, accountability, and better investment outcome. That’s why it’s a crucial part of effective, long-term portfolio management for all organizations.

For help developing an IPS for your organization, call CAPTRUST. Our financial advisors have the expertise and experience to guide you through the process.

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What is Investment Management?

Have you ever wondered how people grow their wealth over time or how they save enough money to retire? Investment management is one part of the answer.

Investment management is the process of creating a comprehensive strategy to manage your investments and grow your financial assets. It means looking at your entire financial picture, your goals and their time horizons, your risk tolerance, and more, and then building a portfolio tailored specifically to you.

At CAPTRUST, investment management is one of the three pillars of our wealth management process, along with goal setting and risk management. It’s an important part of financial planning, which also includes strategies like budgeting, saving, and managing debt.

Investment management is something everyone should consider, regardless of your income or net worth, because it can help you understand and balance goals that sometimes compete with one another. It can help you take control of your financial future and make sure your money is working as hard as it can.

Whether you’re working with a financial advisor or managing your own investments, the first step is to name your financial goals. Do you want to save for a down payment on a home in the next five years? Pay for college for your children? Or reach a specific savings goal before retirement? Whatever your goals are, it’s important to define them because then you know how much money you’ll need.

Next, evaluate your risk tolerance. This means figuring out how much risk you’re comfortable taking with your portfolio. Are you the type of person who can handle big swings in the stock market? Or do you prefer a slow and steady approach to growing your wealth?

Once you’ve set your goals and risk tolerance, it’s time to choose specific investments. Examples include mutual funds, exchange traded funds, stocks, bonds, or alternative investments like real estate. The key is to diversify your investments across different asset classes so that you’re managing the risk of large losses while also achieving the returns you need to reach your financial goal. It’s also important to understand the tax implications of each type of investment. Certain investments, like municipal bonds, and certain investment accounts, like 401(k)s, 403(b)s, and individual retirement accounts are tax advantaged.

Deploying the right investments at the right time in your life can help reduce your taxes or at least make them more predictable. Although you don’t need to manage your investments on a day-to-day or even monthly basis, you should check on their progress every year or two, or whenever there’s been a big change in the markets or in your life.

At that point, you may want to make some adjustments. For instance, you might need to rebalance your portfolio to maintain your target risk level. Over time, some investments will likely perform better than others. causing your portfolio to drift away from the original plan. Rebalancing can help you get things back
on track.

The most important thing to remember is that it’s not about choosing the right stocks or funds. It’s about taking a comprehensive look at your entire financial picture and crafting an investment strategy that addresses your specific needs and goals. By taking this holistic approach, you can ensure that all the different pieces of your financial life are working together to create the best possible outcomes.

To learn more, call CAPTRUST. We’re here to help.

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Selecting a Qualified Default Investment Alternative (QDIA)

As an employer, you may choose to offer various benefits to help your employees build their own financial security, especially when it comes to retirement. One effective tool for this is a QDIA, or qualified default investment alternative. A QDIA is the default investment option offered inside an employer-sponsored retirement plan. If an employee contributes to the plan but does not specify how they want their money invested, it is automatically allocated to the QDIA.

QDIAs were created by the Pension Protection Act of 2006. This act was designed to get more people to enroll in employer-sponsored retirement plans and to protect plan sponsors when they choose investments on behalf of their enrolled employees.

A prudently selected QDIA can help provide plan participants with a well-rounded investment portfolio, even if they did not select it themselves. But not every type of investment can be selected as a QDIA, and those that are must meet specific requirements outlined by the Department of Labor.

There are three main types of QDIAs: target-date funds, managed account services, and balance funds. Each type has its own way of managing a mix of stocks and bonds and comes with its own benefits and considerations to understand.

When selecting a suitable QDIA for your participants, start by looking at the overall demographics of your workforce. Your employees ages, savings rates, and retirement balances can help steer you to the right type of QDIA.

Next, evaluate whether the mix of investments in that potential QDIA suits your employees’ needs. Comparing and contrasting multiple options can help you find the best fit. Consider factors such as risk, return, and cost. These aspects can have significant impacts on participant account balances and behaviors.

Finally, make sure to educate your employees about their QDIA. Explain what a QDIA is, the associated risks and benefits, and how they can choose a different option if they want. Clear information can help employees feel more confident in their QDIA and more informed about their retirement choices. Carefully selecting a QDIA is not only elemental to your fiduciary process, it’s a way to improve your employee’s retirement outcomes.

To learn more about selecting the right QDIA for your retirement plan, or to assess whether your current QDIA is appropriate for your employees, call CAPTRUST. We can help you make an informed choice.

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In personal finance, there’s a common misconception that diversification means having several accounts at different institutions or with multiple advisors, and so many people keep their assets spread out unnecessarily complicating their financial lives. In truth, diversification refers to the asset allocation of investments within your portfolio, not where you hold them. So, in general, it’s better to consolidate investments into fewer accounts with one advisor or investment manager. This is called asset consolidation.

Asset consolidation refers to the process of combining or merging various assets and accounts. The primary goal is to streamline and optimize the management of these assets, creating a more cohesive and efficient portfolio. Asset consolidation has four main benefits. First is improved planning instead of juggling too many accounts and investments, consolidation allows you to centralize control with everything in one place. It’s easier to see your full financial picture, which can help you make better financial decisions.

Asset consolidation also makes it easier to implement portfolio changes like buying and selling investments. And it simplifies record keeping because working with few institutions means fewer monthly statements and tax documents. Consolidating can also help reduce your total fees. In general, the more assets you hold with one provider, the more opportunities you may have to reduce or eliminate account fees, transaction costs, and administrative expenses.

Although the benefits of asset consolidation are compelling, the consolidation process can be intricate and time consuming. Transferring assets, updating legal documentation, and coordinating with various financial institutions require careful planning and execution. Before you make any moves, talk to a financial professional to discuss the best strategy. Asset consolidation will look different for each investor, and an advisor can help you determine the first or next steps.

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Donor development means creating and sustaining authentic connections with those supporting your nonprofit. By nurturing these relationships, you can build a strong, engaged donor community and help ensure your organization’s long-term financial stability. Donor development is crucial to nonprofits, and it’s the responsibility of all members of your organization, starting with senior leadership.

When evaluating your organization’s donor development programs, consider these five steps.

• Identify potential supporters.
• Build authentic relationships.
• Create engagement opportunities.
• Encourage continued support.
• And leverage technology.

To identify potential donors, research the people, corporations, and organizations that align with your mission. One way to start is by consulting with your current supporters. Volunteers have the potential to be great donors as they see firsthand not only the impact of the work your organization does, but also how well it’s run. Sometimes, volunteers want to give their time and talent as a path towards later financial support. Community events, social media, and local fundraisers are also great tools to find more supporters.

To build authentic relationships, personalize your approach to each new donor or donor group by working to understand their unique interests and motivations.

Regular communication is important. Keep donors and potential donors well informed with periodic updates about your actions and impact. Invite them to events, offer behind the scenes tours, and show them how their contributions make a real difference.

Remember that potential donors may prefer different methods of communication, with some preferring email or social media and others a newsletter or personal note. Having several ways to engage with donors is another piece of the puzzle. Create in person and virtual volunteer opportunities. Or ask donors to participate on an advisory board. Recognize their contributions publicly through newsletters, social media, or at events. Your gratitude will strengthen their connection to your cause.

To encourage continued support, regularly provide donors with clear information about how their contributions are being used. Transparency builds trust. Consider a donor recognition program to honor long-term supporters and major contributors.

And last, leverage technology. Use donor management software to track interactions, preferences, and donation history. This data can help you tailor your communications and engagement strategies.

Above all, you need to make it easy for donors to give. Have you explained your ability to receive non-cash gifts? Do you clearly state that you welcome gifts of stock by donor-advised funds or qualified charitable distributions? If not, how could you improve your donor education materials? Remember, donor development is a continuous process.

These steps help endowments and foundations create a sustainable donor base, ensuring that your organization thrives long into the future. Want to assess your current donor development programs? Call CAPTRUST. We’re here to help.