, the Boston-based analytics firm, said non-profit organisations seek OCIOs at a “higher-than-historical rate,” because they lack access to high-quality private investments and want a “strong environmental, social, and governance policy.” Cerulli said it expects to see OCIO platforms with strong ESG positioning in their private asset classes having an advantage when winning new clients in the non-profit space. In its report, Cerulli said that 79 per cent and 69 per cent of OCIO providers expect the demand for private equity and other private investments, respectively, to increase.  

Private is where returns are 
Dimitruk doesn't think that investors can rely on listed equities to drive adequate returns, touching on the secular shift towards private market investments that has, with some interruptions, been going on since the dotcom boom of the late 1990s.

“Our view is that conventional public equities are highly unlikely to provide the returns one is looking for to support institutional or family objectives.” 

The world of rising interest rates has changed the investment equation, he said. 

“We do a lot in private equity, private credit and private real estate. The primary source of excess return (Alpha) is in investing compound over time in terms of returns. However private markets are both complex and challenging to access. Over the past 40 years, central banks actively suppressed risk, maintaining an essentially zero cost of capital. Life in the investment world was easier, but this benign era where risk was masked is now at an end,” he said. 

“As interest rates have gone up, the discounted future value of earnings has gone down. This had a negative impact on the valuation, particularly of high-growth firms, notably tech firms, causing a massive re-rating of these businesses,” Dimitruk continued. 

Inflation is top of mind
Asked what most concerns clients, Dimitruk said inflation and the path of interest rates are top of the agenda. 

“The primary questions clients ask today are over the future direction of inflation and interest rates and the impact on both their investment programmes and on their ability to sustain their financial objectives, notably the spending rates of philanthropic institutions such as a school,” he said. 

“The rise in inflation was not a surprise given recent monetary and fiscal policy, but what no one could have foreseen was how much inflation would be further stimulated by the Russian invasion of Ukraine and the Chinese Covid lockdowns,” he continued. 

Founded in 2001, Partners Capital has offices in Boston, New York, London, Singapore, Hong Kong, San Francisco and Paris. 

Families and endowment mind-set
Dimitruk referred to one family client that represents seven generations starting in Europe, they are now in the US as well, with more than 250 members. This can create a higher level of complexity than with first generation wealth.

Waiting until the senior members are no longer able to manage the family wealth themselves and failing to address the “endowment” aspect of such wealth, can put a family’s goals at risk, such as the ability to support philanthropic goals over the long term, he added.