What It Takes to Run Investments In-House vs Outsourced CIO Cost

If your firm is managing investments in-house, do you know what it's truly costing you?

Most firm owners assume it’s cheaper to build an internal investment team. But once you account for compensation, systems, oversight, and leadership time, total costs often exceed expectations, and the returns don’t always justify the spend.

A 2025 survey from CIO Magazine and OCIO.org found that 46% of institutional asset owners now outsource some or all of their investment functions. These decisions are not just about capacity. They're about cost clarity and performance accountability.

This article breaks down where internal investment costs hide, how OCIO pricing compares, and what firm owners need to evaluate before assuming their current setup is working.

What OCIO Pricing Includes and Why It Matters

Before comparing internal costs to outsourcing, firm owners need a clear view of how OCIO pricing works. Most outsourced chief investment officer (OCIO) providers use one of three fee models. But understanding what those fees include is just as important as the number itself.

OCIO Fee Structures: Flat, AUM-Based, and Performance-Based

OCIO pricing typically follows one of three models:

• Flat fees offer predictability. They are often tiered based on operational complexity, portfolio size, or the range of services provided. This model is common among family offices, foundations, and smaller institutions that want consistent budgeting.
• AUM-based fees are the standard structure across the industry. According to Cerulli Associates’ 2024 OCIO Providers Survey, advisory fees for portfolios between $51 million and $100 million typically fall between 0.21% and 0.30% of assets under management. Fees may decrease as AUM increases, reflecting scale advantages, and may vary depending on whether the provider has full or partial discretion.
• Performance-based fees tie compensation to exceeding a benchmark or absolute return threshold. This structure aligns incentives but adds variability and governance complexity. Boards and investment committees need to weigh the upside of performance alignment against the potential budgeting unpredictability.

Choosing a fee model is a financial decision that also shapes how risk, accountability, and discretion are shared between firm and provider.

What OCIO Fees Actually Cover

Unlike the fragmented and often hidden costs of an in-house setup, OCIO fees typically bundle a wide array of investment management services into one predictable line item:

• Investment policy design and portfolio construction
• Manager research, due diligence, and implementation
• Strategic asset allocation and rebalancing
• Risk management oversight and regulatory compliance
• Reporting, performance attribution, and investment committee materials
• Governance support and market insight briefings

This consolidation reduces the need to engage multiple vendors or consultants and eliminates the operational complexity of managing each component separately. It also provides access to institutional share classes and negotiated pricing structures that are usually unavailable to smaller firms or nonprofits operating independently.

What You're Really Paying For

The OCIO model gives firms access to infrastructure, investment discipline, and advisory support that typically require a full internal management team to replicate. An experienced provider helps optimize investment decisions, streamline governance, and rebalance risk without compromising strategic goals.

The question isn’t whether the fee looks low on paper. The real consideration is whether your current structure delivers equivalent investment performance, control, and oversight without creating cost silos, execution gaps, or leadership drag.

Why Internal Investment Teams Cost More Than You Think

Many firms build internal investment teams under the assumption that doing so grants control, improves oversight, and reduces costs. But when every line item is exposed, such as staffing, systems, oversight, and executive time, the internal model often proves more expensive and less efficient than expected.

Headcount and Compensation

Building an in-house investment operation requires more than just a CIO. Most mid-sized firms need analysts, operations support, and administrative roles to function at scale. This staffing structure often costs $750,000 to $1 million annually, even before layering in bonuses, equity incentives, or retention packages.

Firms aiming to customize investment strategies or expand into complex asset classes must recruit investment officers with specialized experience, adding further cost and pressure to the compensation model.

Recruitment, Retention, and Turnover Risk

Hiring high-performing investment professionals is time-intensive and expensive. Search firms charge 25 to 35 percent of first-year salary, and retention risk follows every hire. When investment managers leave, firms lose critical relationships, institutional knowledge, and continuity in decision-making.

Turnover creates delays in manager evaluation, disrupts investment committee workflows, and forces leadership to step in where process gaps exist. These disruptions rarely show up on spreadsheets, but they erode performance oversight over time.

Technology, Data, and Oversight Infrastructure

Firms that manage investments internally must fully own the systems that support their investment objectives. That includes platforms for risk modeling, performance attribution, compliance monitoring, and reporting.

These tools carry steep licensing fees and require ongoing attention from staff or consultants. Without the shared infrastructure of an OCIO provider, the burden of managing vendor risk, system updates, and regulatory compliance falls entirely on the in-house team.

Leadership Time and Structural Inefficiency

Oversight consumes leadership time and attention that could be spent elsewhere. Managing an investment committee, reviewing consultant input, and troubleshooting execution issues pulls firm leaders away from client work, business development, and long-term planning.

Even well-resourced firms experience slow decision cycles when investment responsibility is fragmented across departments or concentrated in a single CIO. Without clear delegation or embedded discretion, firms sacrifice execution speed and governance clarity.

OCIO vs In-House: Cost Breakdown Comparison

When evaluating cost, most firms rely on gut feel rather than line-by-line math. Seeing the actual cost structure of an internal team versus an OCIO provider reveals a very different picture, especially when scaled to a mid-sized portfolio.

Here’s a representative annual cost comparison for a firm managing $500 million in assets, assuming a fully staffed in-house investment team and a full-scope OCIO relationship with 0.30% AUM-based pricing:

Note: Estimates are based on industry benchmarks, including 2024 data from Cerulli Associates and Institutional Fidelity. Actual costs vary depending on staffing structure, platform complexity, and service level.

At first glance, the OCIO appears more expensive. But this misses what the fee actually replaces: salaries, software, oversight functions, compliance risk, and leadership drag. More importantly, OCIO fees scale with assets, not with internal headcount or operational friction.

Firms looking to compare internal models against a scalable OCIO solution should start by evaluating what services are truly bundled and what risks remain on the table. For many firms, the cost per dollar of effective investment oversight is lower with an outsourced model, especially when performance, execution speed, and risk mitigation are factored in.

Common Misconceptions About OCIO Cost

Cost objections to outsourced chief investment officer (OCIO) services are often built on legacy assumptions that no longer reflect how today’s OCIOs operate. These myths can lead firms to stick with costly, underperforming in-house setups long after better options exist. Let’s clarify three of the most persistent misconceptions.

“It’s Only for Large Institutions”

OCIOs are no longer exclusive to multibillion-dollar endowments or global nonprofits. Mid-sized firms, family offices, and regional organizations now use outsourced CIO solutions to gain access to institutional-grade investment infrastructure without needing internal teams or massive scale.

In fact, many OCIO providers now specialize in portfolios between $50 million and $500 million. These firms leverage OCIO services to expand their investment strategies, improve manager selection, and meet fiduciary obligations with far less internal complexity.

“We’ll Lose Control of Our Investments”

This is one of the most common fears, yet it reflects a misunderstanding of how OCIO relationships are structured. Clients maintain control over investment policy, risk tolerance, and strategic direction. The level of discretion given to the OCIO can be customized based on governance needs.

Firms can choose full discretion, partial discretion, or consultative-only relationships. A well-structured agreement outlines how the investment committee interacts with the provider, what approval thresholds exist, and how portfolio changes are communicated. Modern OCIO partnerships are defined by transparency and alignment, not a loss of control.

“Doing It In-House Is Cheaper”

While in-house models may seem cheaper at first glance, they hide costs across payroll, vendor licensing, oversight risk, and executive distraction. OCIO pricing is bundled, audited, and tied directly to deliverables. There is no ambiguity about what the firm is paying for, or what expertise is being delivered.

Many firms discover that OCIOs reduce costs while improving performance, execution, and strategic focus. What looks like savings in a traditional investment setup often leads to costly inefficiencies that an experienced OCIO can eliminate.

How to Evaluate Your Current Investment Costs

Firms often underestimate what it truly costs to manage investments internally. Salaries are only part of the picture. To make a clear comparison against an outsourced chief investment officer model, you need to account for every cost category tied to strategy, oversight, and execution, especially if you're considering an insourced CIO alternative.

Internal Investment Cost Checklist

• Total compensation for all investment officers and support staff
• Technology, data platforms, and compliance systems
• Legal and regulatory oversight tied to investments
• Consultant fees for manager selection and asset allocation
• Time spent by the investment committee and firm leadership
• Delays in execution or missed performance opportunities

When you add these up, the internal model often reveals itself to be fragmented, resource-heavy, and slow to adapt. A bundled OCIO structure offers a centralized alternative that can lower oversight costs while improving transparency and investment discipline.

Rethink Your Investment Oversight Model

Most firms assume that building an internal investment team gives them more control at a lower cost. But once you account for staffing, systems, oversight, and execution risk, that assumption rarely holds up.

OCIO providers offer more than convenience. They deliver institutional expertise, strategic discipline, and scalable investment oversight. For organizations seeking transparency, cost-efficiency, and performance alignment, the outsourced model is often the smarter choice.

If your team hasn’t reevaluated its current investment setup in the last 12 to 24 months, now is the time to benchmark your true costs. See what you might gain by shifting from fragmented oversight to a centralized, outcome-driven structure.

Schedule a consultation with Helios to evaluate your current investment model and explore what an outsourced chief investment officer can do for your organization.