Direct indexing seeks to closely track the performance of a market index while creating tax savings to increase returns in taxable accounts. The potential tax savings can offset capital gains anywhere in a taxable portfolio. Portfolios can be customized to reflect investors’ goals and values in taxable and non-taxable accounts. Investors own individual securities in a direct indexing portfolio via a separately managed account (“SMA”). Holding individual securities rather than a single fund is what allows investors to customize their exposure while providing greater tax efficiency. The direct index SMA can be funded with an existing portfolio of securities, including appreciated stock.
Our analytics and optimization platform creates a Direct Indexing portfolio that closely mimics the index, minimizes tracking error, and eliminates unwanted risk exposures.
Provides optimized portfolios, sensitive to after-tax returns, while personalizing to reflect a client's investment goals.
Harvest losses at the individual security level throughout the year. First Trust Direct Indexing SMAs offer continual portfolio review with intra-day tax-loss harvesting to provide a greater ability to generate tax alpha.
Portfolios can be customized to reflect an investor’s goals and values in taxable and non-taxable accounts.
There are many similarities among mutual funds, exchange-traded funds (ETFs) and direct indexing. Typically, investors use ETFs and mutual funds to gain indirect exposure to the securities in a benchmark. Although ETFs and mutual funds can deliver broad market exposure, direct indexing does so with a key difference: a portfolio can be tailored to an investor's specific needs and tax loss harvesting strategies. This portfolio of the optimal component stocks of a benchmark, held directly in an SMA, can be funded with either cash or with an existing portfolio of securities (in-kind), including appreciated stock, which provides the potential to create tax alpha beyond what ETFs and mutual funds may offer.
Investors can express their view through traditional factors, risk management strategies, or values-based investing. Our platform offers a vast amount of preset options to add or eliminate companies, industries and sectors. We also offer the ability to blend indexes and build custom solutions.