Direct indexing is wealth management's fastest-growing category
The thesis argued is that direct indexing, particularly with long-short structures and option overlays, is becoming the dominant vehicle for high-net-worth tax-loss harvesting.
The argument
The hosts discussed BlackRock's Aperio platform, noting that the industry focus has shifted from pre-tax to after-tax returns. Long-short direct indexing structures (like 130/30 funds) solve the problem of running out of losses to harvest in standard long-only index portfolios.
The thesis, stress-tested
✓ What validates it
- ✓BlackRock successfully doubling or tripling its direct indexing and option overlay business
- ✓Continued record net inflows into custom indexing platforms over successive quarters
▸ Risks discussed
- ▸Investors running out of harvestable losses after the first few years of a standard direct index
- ▸High complexity of long-short overlays for average retail clients
Hear it yourself
"We continue to believe that long short direct indexing with option overlays, they have a company called Spider Rock, is going to be a great growth area, and we hope to double, triple that business over the near term."
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