Fewer, clearer decisions: Hamilton Wealth takes the OCIO route

A year ago in New York, Hamilton Wealth Partners founder and chief executive officer Will Hamilton sat down with an US outsourced chief investment officer (OCIO) firm to learn more about how it worked, and part of that conversation stuck with him.

“There was one comment they made, that the problem with a lot of firms is their APLs become a byproduct of what they’ve been sold,” Hamilton tells Professional Planner. 

“Those were the words they used, and I thought that’s a really interesting comment. So, I just looked into the space a lot more.”

Hamilton says he “hadn’t really heard of [the OCIO concept], to be honest” before the New York conversation.

“We had noted the… the amount of product that was becoming available and being shown to us. We also looked at the geopolitical effect on markets that had occurred really since 2022, since the current Ukraine conflict occurred; our business got bigger; and so you looked at everything together, and I felt [I] needed to do something,” he says.

With four advisers plus Hamilton himself looking after 142 clients and about $1.3 billion of funds under advice, HWP had considered building out an internal capability, but ultimately went down the OCIO route and spoke to six potential partners about how it could work.

“What it made me realise was this was the route we needed to go down, rather than doing it internally, because their capability was really impressive, and I just thought to myself, we’re not going to be able to replicate this internally,” Hamilton says.

“So then you work out who’s best for you as a firm.”

Better outcome for clients

HWP now has a partnership with arcpoint OCIO, and while it’s in its early stages Hamilton says “the belief is it will provide a better outcome for our clients, that’s why we’ve done it, and that’s why we’ve made this investment”.

In Hamilton’s terms, “better” means “clearer, stronger decisions, and I think that’s really important, and therefore that’s reflected in our portfolios, in portfolio construction”.

“One of the things that sold us [on the OCIO route] was we believed that we were seeing too many asset allocation changes, and they said to us it’s about two or three really major changes a year.

“That actually was something that we identified with and was something that was part of the process we were looking through with not just them, but with everybody we spoke to.”

Founder and chief executive officer of arcpoint OCIO, Jacqui Fernley, says strategic asset allocation remains the single most important decision to get right, and that frequent, small changes to asset allocation really don’t add value.

“The only person that benefits from lots of little intricate decisions is the platform and the transaction fees that go with it,” she tells Professional Planner.

“Certainly from an equity standpoint, or a global macro standpoint, there are only ever four or five decisions you make a year that make a difference. 

“It is really about just having a handful of good ideas through the year, especially for wealth practices where the portfolios are bespoke.”

Hamilton says an OCIO arrangement replaces an earlier consulting relationship. 

“In the past when we’ve wanted something, we’ve gone to our consultant and they’ve given us two or three ideas, and we’ve then gone and looked at those and what we thought was the best outcome, and we’ve also had asset allocation advice from them,” he says.

“But this is looking at, in particular, some themes and trends for the short term, which we have been missing, and also the markets have evolved to where really beta has taken over in the public markets, in the core parts of your public markets.

“In mid-caps and things it’s very different, and you need that alpha to be driven from small cap and other satellite areas, and also you know I think that alternatives have become a very important part of portfolio construction, but we believe we needed greater input.”

The universe has exploded

Fernley says the investable universe has exploded on the past decade or two, and it is pushing more mid-sized advice practices toward OCIOs.

“It’s a long time [since] the asset allocation was equities, bonds and cash. It’s a lot more complex than that now,” she says. 

Advice practices like HWP compete for sophisticated clients against major players such as Crestone, Koda and JB Were, and “the smart ones realise they can’t be everything to everyone, so they bring in the services they require”, Fernley says.

HWP was “very clear on what they were looking for, how they wanted to receive it, and the process was really quite streamlined”. But where a practice is not quite as advanced or clear in its thinking, the process can take longer.

“The beauty of working with Will and Hamilton Wealth is that they’re very aligned internally as to what they do and how they do it,” Fernley says.

Hamilton says the firm hasn’t outsourced this aspect of its investment capability as a cost-cutting measure. In fact, costs will increase. 

But having outsourced investment functions – though none of the responsibility – he expects the payoff will include advisers’ time freed up and redirected toward improving client experience, and toward the inheritance and succession conversations Hamilton says are becoming a bigger part of the business. 

What he cannot yet quantify is how much extra client capacity that newfound time will create. 

“I don’t know if that’s going to be ten more clients, fifteen, or five,” he says. “We’ll find out in time. Ask me in two years.”