DIRECT INDEXING How to Evaluate a Direct Index Provider
See how direct indexing compares to index funds and ETFs for investors who want to customize their accounts or minimize investment-related taxes.
Kevin Maeda, Chief Investment Officer of Direct Indexing at Natixis Investment Managers Solutions, offers a three-part framework for evaluating potential direct index providers.
- Using the three P’s of manager due diligence – People, Process and Performance – is a good way to uncover and understand differences between strategies.
- People – A team with a long track record running a large account base is more likely to have experienced many of the unusual situations that can arise when customizing thousands of portfolios.
- Process – While most direct indexing strategies use optimizers and multi-factor risk models, other approaches, such as stratified sampling, can offer different features and benefits.
- Performance – Since much of the benefit of direct indexing is tax-related, it’s critical to compare the after-tax returns of the strategy and the benchmark.
Tax-Efficient Investing in Separately Managed Accounts (SMAs)
Direct Indexing SMAs can help address key issues facing tax-sensitive investors. All accounts are actively managed to optimize tax loss harvesting while providing beta exposure to an index. Our tax-managed SMAs include: