What Is a Chief Investment Officer (CIO)?

A chief investment officer (CIO) is the C-suite executive responsible for setting the investment style and strategy of a firm's investments. The CIO thus oversees the management of an organization's investments. Depending on the type and size of the organization, the CIO may directly oversee investments or manage a team of professionals who have such responsibilities. The CIO may also choose to outsource some or all investments to an outside sub-manager. The CIO may also head a company's investment committee.

Broadly the CIO will be responsible for activities such as sourcing, managing, and monitoring investments, establishing an investment policy statement (IPS), and working with external portfolio managers, analysts, and investors.

Key Takeaways

  • Chief Investment Officers (CIOs) are top executives who manage the investment strategies and portfolios for businesses or organizations.
  • The duties of a CIO and a CFO are sometimes merged into a single position.
  • CIOs are most likely to be found at banks, insurance companies, investment firms, or nonprofit organizations with endowments.

Understanding the Chief Investment Officer Role

A wide range of organizations and businesses have investment portfolios that need professional management, or somebody who oversees the delegation of professional management to sub-advisors or funds. Universities or nonprofit organizations have endowments that need to be managed. Corporations have pension funds. Banks and insurance companies maintain investment portfolios. Basically, any business or organization with a portfolio of assets, such as stocks or bonds, will want an investment professional to oversee the management of those assets.

The role of a CIO sometimes is combined with other areas of finance within a company and taken on by the chief financial officer (CFO), a corporate title more common than CIO. The duties of a CIO may include deciding what amount of an organization’s operating funds may be put towards investment activity with limited overall risk to the organization. This typically includes tailoring and making changes to the portfolio of the company’s investments in order to create a desirable balance between risks and return on those investments.

The investment activity, if managed properly, should not introduce a threat to the liquidity of the organization or its ability to support its operations. While the CIO may follow guidelines set by a board of directors, this executive also may offer advice and recommendations to the board on potential ways the investment strategy and policy may change. CIOs may face high expectations for the performance of the investments they choose to make. Even in challenging market cycles, wherein yields remain low for extended periods, CIOs may be expected to navigate these challenges and uphold the fiscal security of their organizations.

Special Considerations

CIOs help establish investment strategies that are best for an organization's goals. For example, the goal of a pension fund might be limited to meeting its payment obligations, while an investment firm might seek returns that outpace the market. These goals will determine how aggressive or conservative the investment strategy should be.

Depending on the size of the organization, the CIO might be responsible for building a staff. Even with a staff of employees, CIOs also must decide which outside resources best fit the organization's needs for investment services and advice.

Certification as a financial analyst and a keen understanding of financial markets also may be seen as beneficial for those who seek this role. Experience and familiarity with the overall financial needs of an organization and how it might be influenced by an investment strategy also are important.

Communication skills are vital for CIOs in order to make strategies and expectations clear to board members or other stakeholders.