Chief Investment Officers Face a Changing Asset Landscape in 2025

We spoke with Katherine McCabe, Northern Trust Asset Servicing Head of Outsourced Chief Investment Officer (OCIO) Solutions, about the current environment that OCIOs face, leveraging insights from Northern Trust’s recently released “Asset Owners in Focus: Global Asset Owner Peer Study 2025.” The study offers insight into the investment and operations strategies employed by asset owners worldwide. 

Greetings, Kate. As we hit the midpoint of 2025, what’s the state of the OCIO sector?

Katherine McCabe: At a high level, I would say it is “growing and evolving.” Right now, we see tremendous growth in the space, creating both opportunities and challenges. 

The evolution of the OCIO sector creates opportunities for asset owners who now have more access to asset management expertise and different investments they may otherwise not get on their own. It is particularly key for smaller asset owners to be able to access highly skilled asset managers that were previously only accessible to the largest institutional investors. 

Given this growth trajectory, both smaller and larger asset managers recognize that having the proper oversight model is crucial, because firms can quickly outgrow their infrastructure. 

Having the right people and the proper technologies in place to help protect assets is more costly and often more complex than it was even a few years ago. That scenario can complicate the growth that we’re seeing.

You mentioned challenges associated with OCIO growth. Can you go into more detail on that?

McCabe: Many OCIO firms that have been in growth mode are now at an inflection point. They’re revisiting their in-house needs and evaluating the best use of their talent to create an optimal investment operations environment. 

We launched our study this year to gain more insights into some of the internal and external challenges faced by both the investment and operations sides of the house.  

When asked how service providers can help with OCIO’s internal and external investment challenges, 67% said by providing research, and an equal number said by providing data support/reporting. 

When asked how we could help with operational challenges, 56% cited the implementation of technology and helping with target operating model design.

Data, automation and the use of technology were themes we heard across the study and are areas where Northern Trust is well positioned to help. We can support clients with research and thought leadership but also provide options to alleviate the technology and data challenges that can be barriers for OCIOs to scale more efficiently. 

Let’s talk about investment trends identified in the study. What clear trends did you see?

McCabe: The one that really stood out was the increased allocation to alternatives, which we're seeing across the board. 83% of OCIO respondents have some exposure to private markets.  That’s a big number for a very manual asset class, making efficiency key. That increased allocation is also driving a lot of what the study respondents cited as challenges around the administrative burden and the need for greater data automation.  When we asked how OCIOs are making operational procedures more efficient, 89% said through the increase of technology adoption and 67% said through automation. This is again where Northern Trust can help.  

The need for better technology, automation and service is what drove us to create our Front Office Solutions, or FOS, capabilities years ago. Our teams provide a white glove service for private market investments, utilizing proprietary technology to collect, digitize and store documents and data.  This takes much of the manual work away from asset owners and OCIOs and makes it easier for them to focus on value-added input. 

The financial markets have been volatile in 2025, with big impactors like tariffs and interest rates weighing heavily on investor sentiment. What are OCIO’s focused on?

McCabe: We’re seeing liquidity concerns rising across the board, with 67% of respondents saying liquidity has become more important to their investment strategy.  The economic and political environment is forcing investors to think differently about their sources of liquidity, their time horizons, and their asset mixes. In general, that puts OCIOs in an interesting spot, as they evaluate options beyond traditional short-term cash vehicles.

Many firms are looking at their custodial providers to help manage their liquidity needs. For example, they may look to their custodian as a source of credit, or perhaps as a FICC Repo sponsor. Firms are getting more creative in this market environment, and Northern Trust is looking to partner wherever we can add the greatest value.  

Everyone is talking about AI and other innovative technologies that can be put to good use in the portfolio management front, what are OCIOs focused on right now?

McCabe: AI is certainly where the industry is focused, with 47% of our study participants saying harnessing the power of AI is one of their biggest challenges.  This is another reason OCIOs are looking to partner with firms like Northern Trust that may be further down the road in developing AI solutions. 

Beyond AI, a lot of the focus for OCIOs is on data.  Ultimately, that is the foundation of the AI capabilities they may develop, but more than that it is also the fuel to power their business and any new tools and technologies they want to leverage.  Access to well-governed, well-defined data in the channel of their choosing is absolutely key; put simply – giving them what they want, when they want it and how they want it.  We see an increasing number of clients that want to interact with their data in a more flexible and dynamic way, such as via APIs or data sharing. For that reason, we have invested significantly in our core data platform to create a data domain-based model across our organization.  

We’ve heard what OCIOs say in the Northern Trust study, especially about key issues like liquidity, efficiencies, and AI innovation. Are asset servicing clients citing the same priorities? And how can Northern Trust help?

McCabe: Overall, what we’re hearing from OCIOs is consistent with what we’re hearing from our asset owner clients. It goes back to improvement, efficiency, and automation, which both OCIOs and asset owners are looking to prioritize. And of course, the need for data quality is always a focus that we hear regularly. 

At Northern Trust, our goal is to better enable both OCIOs and their end clients. We want our clients to choose us because we make it easier for them to operate through better technology, reporting, automation and, above all, the superior client service for which Northern Trust is known.  This study was incredibly helpful in validating some of the trends we are seeing in the space and we are looking forward to continuing to partner and innovate as the OCIO space continues to evolve.