Role
The CIO in a family office: strategy, selection, oversight
Updated: · Leutrim Miftaraj, FLIORE · Editorial standards · Other languages: Deutsch · Français · Español
Short answer
The chief investment officer (CIO) is responsible for investing the family's wealth: developing the investment strategy and the investment policy statement with the family, selecting asset managers and funds, monitoring risks and costs and reporting to the investment committee. In smaller family offices the role is often outsourced or combined with the head; it is indispensable for large, actively managed wealth.
Tasks
- Set the investment strategy and strategic asset allocation with the family.
- Draw up and maintain the investment policy statement.
- Select and monitor asset managers, funds and direct investments.
- Steer risks across the total wealth: concentrations, currencies, liquidity.
- Measure and negotiate the costs of asset management.
- Prepare the investment committee and implement its decisions.
Working within the team
The CIO decides where to invest; the CFO makes sure that liquidity, payments and accounting are right. Both need the same data basis, otherwise contradictions arise between the investment and the finance view. With compliance, the CIO agrees whether new investments or counterparties require particular checks, for example co-investments with unknown partners.
Avoiding conflicts of interest
A family office CIO should be free of product interests. Payments from fund providers, personal stakes in investments or close relationships with individual banks must be disclosed and regulated. A written set of rules on personal transactions and inducements protects the CIO and the family alike.
In-house or outsourced CIO
With smaller wealth or little active management, the role is often given to an outsourced CIO: a specialised provider that takes over strategy, selection and monitoring. It is then important that the family clearly governs decision rights, reporting duties and remuneration and keeps an overall view itself.
Making it measurable
- Set the benchmark and absolute targets in the investment policy statement.
- Measure the time-weighted return (TWR) against the benchmark, and private market investments additionally with IRR and MOIC.
- Show costs as a percentage of wealth and in absolute amounts.
- Report risk and liquidity indicators regularly.
- Review strategy and implementation in the investment committee every year.
In FLIORE
FLIORE gives the CIO the consolidated view across all structures with look-through, allocation, TWR, IRR and MOIC per mandate, capital calls and open commitments, as well as monthly reports for the investment committee.
At a glance
| Core responsibility | Investment strategy, selection and monitoring, risk |
|---|---|
| Body | Investment committee |
| Alternative | Outsourced CIO for smaller wealth |
Terms on this page
- Capital call
- A request by a private equity or infrastructure fund to its investors to pay in part of their committed capital.
- Time-weighted return
- A return measure that neutralises the effect of contributions and withdrawals and thus measures the performance of the asset management.
Frequently asked questions
Must the CIO manage assets personally?
Not necessarily. In many family offices the CIO selects and monitors external managers instead of buying individual securities. This reduces conflicts of interest and staffing needs.
To whom does the CIO report?
To the investment committee and the head of the family office, and for major decisions also to the family council.
How is a CIO paid?
Usually with a fixed salary and a variable component that should be tied to long-term objectives. Short-term return bonuses can encourage excessive risk.
Does the CIO need a licence?
As an employee of a single family office, as a rule no. If they act as an external service provider for several families, licensing requirements may apply.
How much time does monitoring managers take?
That depends on the number of mandates and funds. A fixed rhythm helps: monthly indicators, quarterly meetings with the managers and a thorough annual review of every mandate against the investment policy statement.
Sources
- Global Investment Performance Standards (GIPS) – CFA Institute
- CFA Institute – Code of Ethics and Standards of Professional Conduct
- Institutional Limited Partners Association (ILPA)
This page provides orientation and does not replace legal or tax advice. The cited legal sources in their applicable version are authoritative.
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