Benefits of direct indexing

Explore what direct indexing is and the potential benefits it can provide to an investor's portfolio.
Aperio Direct Indexing Aperio Direct Indexing

What is direct indexing?

Direct indexing is an investment strategy that seeks to provide similar exposure to a benchmark with a goal of providing after-tax benefits to taxable investors and further personalization. This is accomplished through the direct ownership of individual stocks that are held in a separately managed account (SMA).
Graphical image about investor customization

Key benefits of direct indexing:

Direct indexing puts the investor at the center of the portfolio allowing advisors to address individual tax needs, reflect personal values and personalize according to investment preferences.
number 1
Tax-efficiency
Implement a tax-loss harvesting strategy at the individual security level in an effort to increase after-tax returns.
Number 2
Personalization
Customize an investor’s portfolio according to their investment preferences and values.
Number 3
Greater flexibility
Tax-efficiently liquidate concentrated stock, make deposits and withdrawals throughout the lifecycle of the strategy.

Increased adoption of direct indexing:

Until recently, direct indexing has been a tax-efficient solution reserved for ultra-high-net-worth investors. With enhanced automation and lower investment minimums, it has become a fast-growing investment vehicle for advisors and their clients.
69 number
Of advisors say direct indexing is a top priority to add to their platform this year1
93 number
Of advisors are adopting direct indexing because of the opportunity for greater tax-optimization2

Is direct indexing the right investment strategy for every investor?

Each investor’s situation is different, so its important to consider your clients investing goals before moving forward. A few things to take into account:
1. An investor must have gains to offset losses in order to take advantage of tax-loss harvesting.
2. Although investment minimums have decreased, they can still be considered high for many investors.
3. Depending on the level of customization implemented, higher levels of tracking error may occur, deviating from the chosen benchmark.

Access Aperio Direct Indexing:

For nearly 25 years, we have worked side-by-side with advisors to craft personalized, tax-managed equity SMAs that reflect the individuality of each investor.
icon on thoughtful personalization
Thoughtful personalization
Express the individuality of each investor through a wide variety of customization options, including the most granular level of values-aligned investing.
Learn more about Aperio Direct Indexing Learn more about Aperio Direct Indexing
clip art of 3 experts
Access to strategists
Our strategists work alongside advisors to customize portfolios, seeking to understand the client’s priorities and desires.
clip art of engineering tools
Engineering excellence
Our proprietary system processes granular sets of individual rules and preferences, encapsulating what we’ve learned over 20 years of solving complex investment challenges.

Additional BlackRock SMA solutions:

BlackRock offers 50+ strategies across a broad range of SMA solutions.

Fixed income

Our fixed income team provides advisors a better way to do bonds by crafting scalable, personalized fixed income SMAs.
Learn more here Learn more here

Active equity

BlackRock’s active equity separately managed accounts (SMAs) help advisors deliver personalized portfolios of individual stocks seeking to generate consistent alpha.
Learn more here Learn more here