Insourcing versus Outsourcing Asset Manager Selection

The Hidden Costs of Outsourcing Manager Selection

Institutional investors often question the complexity of their operating models, especially when it comes to manager selection. It is not uncommon for several parties - investment consultants, fiduciary managers, fund-of-funds platforms, OCIO providers - to be involved in sourcing, evaluating, and appointing asset managers. Each of these outsourcing arrangements is designed to bring specialisation, structure, or scale to the process.

However, every new layer comes with a cost. Not only fees, though those matter, but governance burden, fragmented information trails, inconsistent documentation standards, and often a dilution of accountability. As a result, key decision-makers may find themselves further removed from the data and rationale behind manager appointments, making true oversight and alignment harder to maintain.

In the pursuit of cost efficiency and stronger governance, it's tempting to think the answer lies in simply removing or changing outsourced solutions. But this is not the real solution to the underlying problem.

The solution isn’t to change outsourced providers. It’s better infrastructure.

At first glance, cutting outsourced providers from the asset manager selection process seems like a logical path to efficiency and better selection governance. Fewer external people, fewer handovers, less fees. It’s an attractive proposition. But cutting layers without a strategic foundation can backfire. What appears to be simplification can in fact introduce new layers of complexity in more subtle, but dangerous, ways.

Un-strategically removing outsourced providers, in fact, leads to further control breaking down. Different stakeholders, from analysts to investment committees to trustees, operate on incomplete or inconsistent information. What was once handled by specialised partners now falls into a grey area of responsibilities among team members, creating more workflows, stress and pressure on them. This can lead to further confusion over who owns what, who’s accountable, and where decisions were made along the process.

Ironically, governance does not improve, but rather erodes. With fewer external parties involved, the assumption is often that oversight will be tighter. But in reality, when processes lack structure, documentation, and transparency, it becomes harder to track the rationale behind a decision, challenge assumptions, or revisit decisions in light of changing market dynamics. Knowledge management weakens, not strengthens.

In short, fewer outsourced providers involved does not automatically mean better governance. To truly reduce complexity and fragmentation, investment boards and trustees must rethink the infrastructure that underpins the entire selection process, not just the number of external people involved.

The Answer is in Infrastructure

When investment manager selectors reflect on their manager selection process, the spotlight typically lands on visible metrics: performance, fees, ESG ratings, portfolio carbon intensity, active risks versus benchmark, MPT statistics... These are tangible and important to discuss. But beneath the surface lies a quieter, more foundational challenge, which too often goes unnoticed: infrastructure.

Infrastructure does not show up in performance charts or draw immediate attention in board meetings. But it is always precisely this invisibility that makes it dangerous if overlooked. When the infrastructure that supports investment manager selection (the workflows, data capture, communication trails, documentation processes, and evaluation systems) is fragmented or outdated, risk creeps in silently.

Without a well-structured backbone, selection processes start to fray in subtle but compounding ways:

• Key decisions are made without a clear trail, making it difficult to justify or revisit them.
• Collaboration becomes siloed, team members use their own tools, notes, and criteria.
• Data is spread thin, living across PDFs, emails, shared drives, and individual memory.
• Processes are reinvented each time, instead of institutionalized and refined over time.

None of these issues feel like a crisis in the moment. But they erode governance day by day. Over time, they lead to missed insights, delayed decisions, misalignment between teams, and ultimately, exposure to reputational and fiduciary risk.

It's not until complexity and inefficiency compound that the real cost becomes obvious.

Modern investment manager selection demands an infrastructure that supports consistency, transparency, and accountability at scale. Because in the end, the quality of your process is only as strong as the system it is built on. This means building a clear, centralised decision-making process, allowing different parties involved in the selection process to communicate, collaborate, and remain accountable in a unified space. But how exactly can manager selectors do this?

Technology as Infrastructure for Governance

When we talk about technological innovation in fintech, the conversation often drifts towards automation. It’s a seductive idea: faster processing, fewer manual tasks, lower costs. And yes, in many areas of finance, automation delivers real efficiencies. But when it comes to asset manager selection, a domain grounded in judgment, debate, and long-term stewardship, automation alone misses the point.

Asset manager selection is not just a procurement exercise. It’s a strategic decision that weighs quantitative performance along qualitative insight: investment philosophy, team culture, investment process execution, long-term conviction, risk management and repeatability. And in that context, automation may reduce friction, but it does not elevate governance.

What’s truly needed is not less human involvement, but smarter human oversight.

This is why we build technology for asset manager selection that forms the infrastructure to support better governance.

Technology should shift selectors towards empowering smarter governance, ensuring clear oversight, and enabling robust, informed decisions. It should:

• Ensure transparency by keeping a detailed and auditable trail of every decision made, including why, by whom, and based on what inputs.
• Enable consistency across different mandates, teams, and timeframes, avoiding the trap of reinventing the wheel or relying on individual memory.
• Support alignment by making collaboration easier and keeping stakeholders on the same page, literally and figuratively.
• Enrich decisions by integrating diverse data sources, surfacing blind spots, and helping teams ask better questions, not just get faster answers.

In this framing, technology becomes an enabler of strategic oversight. It gives selectors the space to focus on what really matters: identifying excellence, building conviction, and ensuring long-term fit, while ensuring the process that supports those insights is centralised, coherent, transparent, and defensible.

Technology for improving governance in manager selection should not be about replacing critical thinking, but rather about enhancing it.

The real innovation lies in equipping decision-makers with infrastructure that deepens analysis, sharpens judgment, and supports long-term accountability. For example, transparent workflow systems ensure every decision is traceable, which encourages better documentation and collaboration. And advanced comparison engines empower selectors to challenge assumptions and explore alternative hypotheses, not just validate prior preferences.

In short, building infrastructure for governance in manager selection process with technology enables deeper thinking and cuts through complexity.

A Smarter Asset Manager Selection Team

At RFPnetworks, we develop our technology to be precisely the essential infrastructure for institutional investors and asset manager selectors who are ready to rethink, reflect, and re-optimise their asset manager selection process. Our technology provides dedicated tools and a structured environment to centralise governance, enhance accountability, and facilitate clear, informed decision-making.

For teams wondering how to centralise asset manager selection process, RFPnetworks is purposely built to meet that exact need.

Through our infrastructure, manager selectors gain the freedom and flexibility to critically evaluate and continuously refine their selection processes. With comprehensive analytics, intuitive collaboration spaces, and deep, global manager research capabilities, RFPnetworks cuts through complexity, enabling manager selectors and investors to build smarter, stronger, and more accountable investment operations.