The surge has also been driven by millennials seeking personalized portfolios, often with a focus on environmental, social, and governance (ESG) considerations.Īssets under Management (AUM) in Direct Indexing, US Billions Source: MorningStar via Financial Times, FactorResearch In part, this is due to the software-creation technology becoming cheaper and easier to use, which opened the field to new entrants. Over the last five years, direct indexing’s AUM expanded from $100 to $350 billion.
But is it?Īlthough firms like Parametric have been offering direct indexing to their clients for decades, the market’s AUM really started to grow since 2015.
Invisor investment indeed free#
Like many proposals in investing, direct indexing seems like a free lunch that is too good to pass on. And all of this in a fairly automated fashion using modern technology stacks at low cost. On top of that, tax-loss harvesting can be offered. The industry is looking for new revenue-generating business areas and growing client interest in customized portfolios has not gone unnoticed.ĭirect indexing should be an easy sell for the marketing machines of Wall Street: A portfolio can be fully customized to the client’s preferences by, for example, excluding any stocks that contribute to global warming or prioritizing high-quality domestic champions. The rise of exchange-traded funds (ETFs) has steadily eroded the management fees of mutual funds and of ETFs themselves, and with more than 2,000 US ETFs and 5,000 US equity mutual funds all based on a universe of only 3,000 stocks, there is little room left for additional products. The giants of the asset management industry are clearly intrigued by direct indexing and it’s not hard to see why. This year, JPMorgan bought OpenInvest in June, Vanguard took over their partner JustInvest in July, and in September, Franklin Templeton acquired O’Shaughnessy Asset Management (OSAM) and its Canvas direct indexing platform. BlackRock followed one month later by purchasing Aperio, the second-largest player in the space. In October 2020, Morgan Stanley bought the asset manager Eaton Vance primarily for its direct indexing subsidiary Parametric.
Invisor investment indeed drivers#
Posted In: Drivers of Value, Economics, Equity Investments, Investment Topics, Portfolio Management Introductionĭirect indexing is hot.
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