Direct Index Strategies
Direct Index Strategies offers portfolios of individual equities and bond funds benchmarked to well-known indices or managed in a manner similar to popular funds and ETFs.
What Is Direct Index Investing?
​At its core, direct indexing describes the implementation of an investment index for an individual investor in a separate account as an alternative to a mutual fund or exchange-traded fund (ETF).
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The approach was originally used by investors wanting greater potential tax efficiency from a portfolio of individual stocks relative to a broad market index fund. The term has expanded to include a wide range of rules-based strategies that blur the line between passive and active stock selection.
We expand the term to include replication of the “active ingredient” of a traditional mutual fund using individual securities.
Quality
The quality factor targets excess returns from securities marked by
low debt, consistent earnings growth and other “quality metrics”.
The Role of Factors
Value
The value factor aims to capture excess returns from stocks priced below their intrinsic value.
Momentum
The momentum factor seeks alpha from investments demonstrating robust past performance.
Low Volatility
The low volatility factor pursues stocks with below-average risk.
Many successful investment strategies can be explained by the characteristics
(called ”factors”) of the underlying investments including yield, valuation, and size.
Why the Factor Approach?
How do we replicate successful strategies?​
​Using sophisticated statistical software, we can identify the mix of factors that determine a strategy’s historical performance. In most cases, the results are sufficient to create a new strategy with the same flavor as the original, but with better risk-return characteristics.
There is no guarantee that any investment strategy achieves its objectives over a given timeframe. All investments can lose value.