OCIO 101: Exploring the Differences Between Open, Closed and Hybrid Architecture Models

There’s growing interest in the investment community around the differences between open, closed and hybrid architecture platforms, especially when evaluating Outsourced Chief Investment Officer (OCIO) providers.

As an OCIO, we frequently field questions from investors who want to understand how these models work and, more importantly, which approach best aligns with their organization’s investment goals. This is a crucial question, as each model carries unique implications for fiduciary oversight, governance and portfolio construction. By exploring how these models operate, investors can better assess which approach aligns with their strategic priorities and long-term objectives.

Let’s Start with the Basics

Closed Architecture: A closed architecture platform relies on proprietary investment products managed “in-house” by the OCIO provider. This approach may offer streamlined operations, fee efficiency and consistent implementation of the OCIO’s investment convictions. However, it can limit access to specialized strategies or top-performing managers outside the organization.

Open Architecture: An open architecture platform provides access to third-party asset managers and externally managed strategies. In this model, the OCIO selects or recommends managers and strategies from a universe that typically spans a range of asset classes and investment styles. This model offers broad flexibility and customization, but it can also lead to operational complexity and varying fee structures when the client invests in numerous individual managers.

Hybrid Architecture: A hybrid architecture combines elements of both open and closed models. It includes proprietary strategies where appropriate, but also incorporates external managers when they add value or specialization. This model seeks to balance the benefits of internal oversight and cost efficiency with the flexibility and breadth of external expertise.

Fiduciary Oversight and Conflicts of Interest

While architecture models offer different pros and cons, the most critical question isn’t which structure to choose—it’s whether your OCIO is acting as a fiduciary. A fiduciary—like Wespath Institutional Investments, for example—is legally and ethically obligated to put your organization’s interests first, free from conflicts of interest or hidden incentives.

An OCIO can act as a fiduciary in any of the models described above. But some approaches raise more questions about conflicts of interest and fiduciary duty. For example, investors may unknowingly receive biased recommendations when advisors within closed architecture platforms are financially incentivized to promote in-house, commission-generating products.

Key Differences

What Does This Mean for You?

The right architecture depends on your organization’s priorities. If you value maximum flexibility and access to a wide range of managers, open architecture may be the best fit. If you prefer simplicity, consistency and potentially cost efficiency, closed architecture might be more suitable. If you’re looking for a balanced approach that leverages internal expertise and external managers, a hybrid model could offer the best of both worlds.

Our Approach

Wespath Institutional Investments delivers investment management and OCIO primarily through strategies managed by third-party asset managers, selected via a rigorous, research-driven process to seek to ensure clients have access to best-in-class expertise across asset classes. These managers are offered through commingled funds designed exclusively for nonprofit organizations, supporting transparency, diversification, and operational efficiency.

WII does not receive revenue from asset managers, nor do we engage in revenue-sharing or pay-to-play arrangements. Our fee structures are fully transparent, with no hidden charges or sales incentives, and we do not charge for à la carte services like manager searches or asset allocation studies. Our hybrid approach does include an internally managed strategy, the Positive Social Purpose Lending Program, which supports underserved communities and affordable housing investments. This structure allows us to combine the advantages of open architecture with the simplicity and efficiency of a commingled fund platform, helping to ensure mission alignment and objective investment solutions. If your nonprofit organization is considering an OCIO relationship and wants to explore which model is right for you, we’d be happy to talk.