The rise of direct indexing is transforming public equity portfolio construction, giving institutional investors unprecedented control over market exposures through access to increasingly granular trading data. 

Instead of relying on traditional benchmarks, allocators can now customize portfolios to reflect sector convictions, exclude undesirable industries, and manage risk concentrations, like avoiding overexposure to mega-cap stocks such as Microsoft. Experts note that direct indexing's growth has been supercharged by post-pandemic volatility and evolving client expectations around values-based investing and tax efficiency. 

Industry leaders view custom indexing as a flexible, modular solution that enables investors to “build any sector tilt, factor fiesta, or thematic maze,” as one CIO put it. As technology advances and AI becomes embedded in portfolio design, managers must evolve into tech-savvy strategists capable of leveraging these tools for tailored outcomes. 

Finsum: What began as a “nice-to-have” has rapidly become essential in a market where precision, personalization, and proactive risk management drive success.