Displaying items by tag: custom indexing

Monday, 02 May 2022 20:06

Direct Indexing Could Miss the Mark

Direct Indexing is being heralded as the next big wave of investment products, as it gives investors the power to take advantage of tax-loss harvesting and customize it to their interests. However, the dual objectives that they propose could come to compete with each other and undermine investor interests. If investors maximize the tax-alpha they aren’t really aligned with their interests which younger investors are holding as a high priority. Riding a portfolio of all ‘greenwashers’ gives investors few options for tax purposes and deviates too far from the underlying index. The most effective solution might be for financial advisors to develop a better understanding of client interests rather than leaning on a magical new product.


Finsum: Some are calling direct indexing active management in disguise, but investors trying to capitalize on either customization or tax loss might still find it an attractive option.

Published in Wealth Management
Monday, 14 February 2022 17:12

Why the US leads in Custom Indexing

Vanguard turned the investing world upside down with the advent of index-based investing. In 2022 there could be a new predominant investment vehicle taking the reigns: custom indexing. However, this fad has failed to create traction globally the way it has in the US. The two keys that are preventing custom indexing from reaching the same level of success globally are technology and taxes. CI relies on the software tools and facilities to manage this algorithmic portfolio construction, and lots of global firms aren’t there yet. Additionally, tax-loss harvesting makes custom indexing wildly popular in the US, but those same advantages don’t exist in the fiscal structure of other countries.


Finsum: Many of the industry giants are buying up custom indexing firms left and right which will get rid of the technological barrier in custom indexing for countries around the globe.

Published in Wealth Management
Monday, 24 January 2022 09:41

Fidelity is Taking Direct Indexing Mainstream

Fidelity is about to take direct indexing to a whole new level. The asset manager/custodian/broker-dealer is launching its new Fidelity managed FidFolios product, which is a retail-focused direct indexing suite with only a $5,000 minimum and a 0.40% fee. According to Think Advisor “The Fidelity Managed FidFolios combines direct indexing with fractional share trading, which allows clients to allocate assets among multiple positions based on dollar amount rather than share size”. Morningstar gives context to the launch, saying “This is the most mainstream form of direct indexing from a most mainline asset management and provider of investor services seen to date”.


FINSUM: Direct indexing is a heated battleground for asset managers right now, with Fidelity, Vanguard and others in the mix. This seems like a big step.

Published in Wealth Management
Wednesday, 19 January 2022 19:28

Two New Managers Join Custom-Indexing Craze

The direct/custom indexing firm GAMMA Investing got two new investors, riverFront Investment Holdings and Baird. Lorraine Wang is the CEO of GAMMA and supplies custom index-based accounts specifically for financial advisors. Before leading, GAMMA Wang was the head of ETF products and research at Invesco PowerShares. Now GAMMA specializes in custom indexing that tailors to the social, tax, and investment goals of its clients. As part of the investment RiverFront’s COO, Karrie Southall, and executive Director, Laura Thurow from Baird.


FINSUM: The number of firms getting bolstering their custom/direct indexing platforms is growing rapidly, and ESG’s growing prominence is a big part of that.

Published in Wealth Management
Thursday, 06 January 2022 21:20

Franklin Templeton Finalizes Custom Indexing Deal

Word had spread weeks ago that Franklin was in a position to acquire O’Shaughnessy Asset Management (OSAM), but that deal has finalized this week. OSAM will be a bolster an already growing separately managed accounts segment which stands at $130 billion AUM already. However, the big headline is the value-based investing and custom indexing that OSAM provides. The custom indexing platform OSAM owns known as Canvas has grown rapidly and doubled its aum in the last year hitting $2 billion.


FINSUM: This is another headliner deal in direct-indexing. What’s most notable is that many of the deals are coming through acquisitions rather than newer ones originating within the firms themselves.

Published in Eq: Tech
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