MEETING TODAY'S CHALLENGES WITH OUTSOURCED INVESTMENT SOLUTIONS: Many institutional investors are searching for better ways to achieve their investment objectives while controlling risk and managing costs.

This is the second in a series of informative monthly articles for North Carolina businesses from PNC in partnership with Business North Carolina magazine.

From market volatility to an increasingly complex regulatory environment, the challenges confronting institutional investors continue to grow with every year that passes. Many pension plans, endowments, foundations and other institutional investors are searching for better ways to achieve their investment objectives while controlling risk and managing costs.

A growing number of institutional asset owners are discovering the benefits of outsourcing all or part of their investment management functions. An attractive, flexible alternative to in-house asset management and traditional consultant models, outsourced investment solutions can provide an effective way for institutions to enhance their investment capabilities and gain much-needed fiduciary support.

OUTSOURCED INVESTING--A FLEXIBLE SOLUTION FOR INSTITUTIONAL INVESTORS

Outsourced investing is about delegating responsibility for the day-to-day management of the investment program. Specifically, it involves shifting discretionary investment responsibility for some or all investment functions from the asset owner to an investment advisor. Often called OCIO (outsourced chief investment officer), outsourced investing has been used by institutional investors for decades.

ADVANTAGES OF OUTSOURCED INVESTMENT SOLUTIONS

Outsourced investment solutions offer institutional asset owners a number of potential advantages.

1. Improved risk management and fiduciary oversight.

   Seasoned OCIO providers have developed sophisticated tools to help manage portfolio risk and effectively deploy the client's risk budget. In addition, outsourced investment firms have established exacting due diligence and monitoring systems to evaluate third-party managers and--if needed--remove and replace managers more efficiently. Outsourced solutions also provide institutional asset owners with a wide range of options for delegating discretionary investment authority, providing institutions with the ability to shift some of their fiduciary responsibilities.

2. Better allocation of resources.

   Outsourced investment solutions enable institutional investors to allocate their resources optimally. Since an OCIO is responsible for decision-making within the scope of the delegated investment functions, the institutional asset owner can focus on higher-order investment policy matters...