Mercer acquires Vanguard’s outsourced CIO arm, more industry deals expected

NEW YORK, UNITED STATES — Investment consulting firm Mercer has acquired Vanguard Institutional Advisory Services, Vanguard’s outsourced chief investment officer (OCIO) business, and is expected to spark more industry deals in the future.
OCIO search consultant Brad Alford, also the founder of Alpha Capital Management, shared his rosy forecast of the OCIO industry.
“I would expect more deals,” Alford said. “It’s so competitive right now.”
According to data provider Cerulli Associates, OCIO assets are expected to grow to over $3 trillion by the end of 2026. The firm noted that this year in particular, 14% of asset owners surveyed said they’re likely to start utilizing an OCIO for the first time.
Among the benefits of hiring an OCIO is a reduction in operational costs, an efficient decision-making process, and access to more resources.
This brewing interest has spawned new players from boutique firms to major asset managers. This unprecedented number of new entrants alone will set the stage for new deals.
Mercer’s acquisition of Vanguard Institutional Advisory Services is expected to be sealed by the first quarter of 2024. Vanguard’s OCIO arm of 120 employees will move to Mercer once the deal is closed. More than 1,000 Vanguard clients, mostly nonprofit organizations and pension clients, will shift to Mercer. The OCIO unit has $60 billion in assets under advisement.
Mercer and Vanguard are giants in the OCIO business. Mercer managed $354 billion in assets globally as of March 31. Meanwhile, Vanguard has an estimated $59 billion share in the $2.4 trillion OCIO industry.