The misunderstanding that holds the industry back, and how Integrated Trade Management solves it.
Outsourced trading (OT) has evolved dramatically over the past decade. Once a niche solution associated with small or early-stage managers, OT has become a sophisticated operational choice for well-established funds. Despite this shift, some institutional investors remain skeptical: Capital Allocators for the institutional investment industry have raised questions about the prevalence of OT and how they benefit from it.
Skepticism from Institutional Allocators and Large Investors
From pensions and endowments to family offices, OCIOs, and Sovereign Wealth Funds, many allocators are skeptical of managers who outsource their trading. This skepticism, while understandable, is often based on outdated assumptions, and it may be causing LPs to miss out on accessing highly talented managers who value efficiency and focus.
At Meraki, we think a lot about the value that can be added to investors from outsourced trading. In our latest whitepaper, we explore why outsourced trading, when done right, isn’t a red flag but a sign of growth, dedication to their core differentiators that produce alpha, and institutional maturity.
The Alpha Isn’t in the Trade
For decades, the investing world has mythologized the trader. Legendary figures like Paul Tudor Jones and George Soros have been portrayed as market wizards with an uncanny ability to execute. The result? A widespread belief that trading itself is where the magic happens.
But for allocators who look under the hood, the story is different. The real engine behind performance has always been investment research, risk management, and security selection, not the actual execution function and decision being made on the best way to execute buying or selling securities in the markets, in other words the order placement, routing, and execution methods and types.. Trading is essential and even more so when you venture down the less liquid assets and greater trade value, true, but it’s an implementation function. Minimizing execution costs is core to the function, but that doesn’t mean it needs to be done in-house.
Why Allocators Shouldn’t Fear OT
The skepticism toward OT usually boils down to one of three concerns:
These are fair questions, but the best outsourced trading models address them directly. Meraki’s Integrated Trade Management (ITM) model, for example, is designed to act as a true extension of the manager’s investment team. We work inside the client’s systems, trade with their approved brokers and prime brokers, and maintain constant dialogue with their team. Importantly, ITM can provide the expertise the manager needs to invest in higher-alpha regions and asset classes. Expertise that takes too long to source internally, in some cases longer than the opportunity window. ITM is not a handoff; likely it’s an upgrade.
What to Avoid in Legacy OT
While outsourced trading can be transformational, not all models are created equal. In fact, some legacy approaches reinforce allocator fears. Specifically, allocators should be wary of managers using OT models that include:
These models can reduce performance, increase risk, and create a gap between the manager and the trading team. Those approaches simply do not work for today’s fund managers, and allocators understand this. That’s why we built ITM from the ground up to be different: pure buy-side, conflict-free, and embedded into the manager’s investment process.
The Benefits of ITM for Allocators
When done right, outsourced trading benefits both the manager and the allocator.
The result? A more focused, nimble, and capable manager.
What It Signals
At the end of the day, allocators are in the business of evaluating process. ITM is not a shortcut. It’s a sign that a manager understands their edge and allocates resources accordingly. We believe that more allocators should be asking not “Does this manager outsource trading?”—but “How have they integrated it into their operation and how do they leverage it to help generate more alpha?”
Done right, OT is a signal of strategic clarity and operational excellence. That’s what ITM delivers. And that’s why allocators should care.
If you have questions about OT or how Integrated Trade Management works, we’re happy to talk. Whether you’re an allocator evaluating a current manager, or a fund looking to scale with discipline, we’re here to help.
Meraki Global Advisors Disclosure
Meraki Global Advisors LLC is a FINRA registered broker-dealer and member of SIPC headquartered in Park City, UT. The content provided herein is not an offer, solicitation or recommendation of any securities. Meraki and its representatives make no investment recommendations whatsoever. Past performance is not an indication of future results. This document may not be duplicated or copied, is protected by copyright law and may contain privileged or confidential information. Information contained herein does not constitute tax, legal or other professional advice. Content is for informational and educational purposes only. All rights reserved 2025.
