Programming note: Modus occasionally sends timely newsletters in addition to, or in place of, the regular Friday newsletter. Modus reported Tuesday that Asseta, which rebranded itself early this year and kick-started its growth, raised a $4.2 million seed round.
Family offices are growing in number, becoming wealthier and building more complex investment portfolios, a set of phenomena that will cause more of them to seek the help of outsourced chief investment officers and reshape the OCIO industry.
OCIOs in the U.S. are expected to continue growing in the coming years, from $3.3 trillion in 2024 to $5.6 trillion in 2029, according to a report published Thursday by the research and consulting firm Cerulli Associates.
The growth is primarily driven by three factors: investment performance, new money flowing their way from retirement plans or portfolios, and OCIO adoption. Historically, adoption has been the strongest growth driver, and Cerulli expects that will continue to be the case. The firm projects that over the next five years $1.3 trillion will flow into OCIOs, either from clients expanding their relationships or from investors hiring one for the first time.
Most of that $1.3 trillion will come from corporate defined contribution plans ($294 billion) and corporate pension plans ($248 billion). However, the OCIO space is getting more competitive, as more investment consultants, asset managers, banks, and wealth managers enter the industry. If OCIOs want to remain competitive and capture part of the mountain of new money seeking their services, they will need to work with all types of investors, including private clients, according to Cerulli.
And a significant part of that private client channel is single-family offices.
Family offices haven’t taken to OCIOs as much as institutional investors. Only 22% of offices have used an OCIO or would consider doing so in the future. Meanwhile, Cerulli’s surveys of institutional investors with similarly sized portfolios are heavy users. Among university endowments with between $100 million and $250 million in assets, 60% have relationships with OCIOs, and among 127 endowments with $251 million to $500 million in assets, 51% have relationships. The same research showed that 35% of foundations with $100 million to $500 million in assets also worked with an OCIO.
Family-office and institutional portfolios can be wildly different. But, on average, the largest family-office portfolios have comparable strategic asset allocations, and their investment teams are often alike (small).
Institutional investors are also giving OCIOs more to manage. If the rate continues at its expected pace, nearly half of corporate defined benefit (45%) and endowment (47%) assets will be managed by an OCIO before 2029. Private wealth is projected to grow from just 3% to 3.8% over the same period, but that is a reference to the entire private wealth segment. The vast majority of private investors, at least currently, aren’t prospective clients of an OCIO like Cambridge Associates, which has worked with family offices for decades and intends to grow that part of its business.
The percentage of family office assets managed by OCIOs is unclear. But if 22% of offices have some kind of relationship with an OCIO, it’s almost certainly higher than 3%.
“The industry is in different stages of its lifecycle, depending on the client channel,” Chris Swansey, an associate director at Cerulli, wrote in the report. “The portion of the industry focused on serving corporate DB plans is further along in the industry lifecycle than the portion focused on endowments, foundations, and the private wealth segment. Fees are more standardized, assets are more consolidated, and the remaining addressable market is shrinking more rapidly.”
As a result, according to Cerulli, the large, mature OCIOs are expected to focus heavily on the rapidly growing nonprofit and private wealth segments, accelerating the industry’s maturity in them. While this might not be good for the small OCIOs facing that competitive pressure, family offices and other investors should benefit from fee compression, consolidation, and more standardization among providers. Offices might be even more likely to consider an OCIO then.
But like with institutions, the growth curves for family-office OCIO adoption and the percentages of their portfolios they turn over to the firms will eventually flatten.
“If organic growth opportunities eventually decline, large OCIO firms are expected to seek inorganic growth through acquisitions. These developments are poised to reshape the industry’s evolving landscape.”
Ren powers over $175B in DAF assets and enables $25B in annual charitable grants through leading financial institutions and many of the country’s most sophisticated family offices.
As a charitable strategist, here are the three questions I hear most from family offices about DAFs:
How do DAFs fit into our broader governance and multi-generational structure?
Family offices want charitable vehicles that align with their existing architecture. Our DAF programs support bespoke governance models, customizable permissions, and multi-user access so each family member or advisor has the right level of visibility and authority.
Can a DAF handle the complex assets we need to contribute?
Not all DAFs. But Ren is well-equipped to guide families in gifts of private business interests, real estate, alternatives, and other non-traditional assets, and is backed by nearly 40 years of charitable giving expertise and the white-glove support families expect.
What differentiates one DAF administrator from another at the institutional level?
Key differentiators to keep top of mind are investment flexibility, discretion, operational control, streamlined reporting, and smooth integration with the family office team and advisors. Ren’s institutional-grade infrastructure — the same platform used by top financial firms — was purpose-built for this level of sophistication.
More News
- Investment opportunities in regenerative landscapes are being overlooked, BCG argued in a report this week. The global food system accounts for a third of greenhouse gas emissions and employs nearly 1.3 billion people, but the Climate Policy Initiative estimates that only about 7% of climate finance goes toward making the food system more sustainable. “Efforts in Brazil are already making this approach a reality, offering investors access to an opportunity with an estimated total worth of $55 billion and an average internal rate of return of 19%,” the management consultant points out.
- After losing the Gates Foundation as a client, controversial consultancy firm Arabella Advisors announced this week that it will close.
- The world’s most common passwords usually follow the same formula. Yikes!
Jobs
- Cedar Pine, a single-family office in Northbrook, Illinois, is hiring an investment associate to join its team, which primarily makes direct investments in privately held, high-growth businesses, and at multiple points during a company’s lifecycle (growth and late-stage buyout). The SFO is also hiring an assistant legal counsel to support the private investment team's activities and general corporate matters. Pay and benefits for both roles are competitive.
- The Dalio Family Office, which supports ventures, investments, and philanthropic efforts of Barbara and Ray Dalio and their family, has eight open positions right now: an office production and services specialist, a communications associate, a global macro intern for the summer of 2026, a cyber security analyst, one finance operations associate, an estate planing and legal counsel, a tax manager, and a senior tax manager.
- Whitman Advisory is hiring a family office accountant.
Other Stuff
- 1,800+ people follow Modus on LinkedIn because it only shares timely, worthwhile updates.
- Keep sending me tips! These can be light (topics you want to read more about) or weighty (specific information about changes or wrongdoing). The best ones include documentation. And you can, in confidence, reply to this email or message me on Signal using a personal device that is not accessible by your employer.
- Want to advertise in Modus? Fill out this form now to get the sales deck and lock in the current rate.
I'll be in...
- Doing as little work as possible next week in Green, Ohio. (Happy Thanksgiving!)
- Back in N.Y.C.
