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Advisors and Direct Indexing:

Compact DITM... A Better Way of Investing for You and Your Client

Why buy an index fund, ETF, or Direct Index?

  • Diversification - Lower risk
  • Lower costs - Lower expenses than actively managed portfolios
  • Lower turnover - Means lower trading costs (commissions and bid-ask spreads) 
  • Lower taxes - Resulting from lower turnover means better after-tax returns
  • Attractive Returns - Only about 23% of actively managed mutual funds outperform the S&P 500 over five years, according to research by Standard & Poor's.

Which One?

        Source: Global Macro Asset Management.


Consider this:

When you buy an index fund, you get a diversified selection of securities in one easy, low-cost Index that typically provides better returns than most fund managers. But at its core, (no pun intended) Advisors and clients buy an index fund not because they want to duplicate it exactly but to ensure that they participate in that Index or asset class's performance while achieving adequate diversification.

Until now, if one wanted to accomplish those things with Direct Indexing, it could take a minimum of 100 securities. That is why we developed Compact DITM. Let's get real. Index Tracking Error is not a metric on most clients' radars nor at the top of most Advisors concerns. Five hundred securities may be acceptable for the $90 billion IBM pension plan under a mandate to dedicate a portion of their portfolio to the S&P 500 exactly. But is that granular level of index tracking necessary for the average investor and Advisor? Compact DITM delivers similar results to the chosen Index but is more understandable, manageable, and client-friendly. And by the way, there is no need to worry about the manager drifting from their benchmark.

Even the most sophisticated investor... 

A friend who is an Advisor to a $10 million Family Office recently had a call from his retired business owner client asking, "Why do I own so damn many stocks?"

Our answer is you don't need to own "so damn many stocks."

Compact DITM's US Core Direct Index portfolio contains 22 large-cap stocks, diversified among 11 economic sectors. Technically elegant yet client friendly portfolios easily managed and explained to your clients.

How to get started

  1. Let us know what Index or ETF you would like to replicate.  You can choose from our off the shelf global Indexes or from among thousands of available Indexes. Our algorithms will go to work, duplicating it in the most economical and diversified manner.
  2. Indicate if there are any restrictions or unique accommodations you or your client would like. Concentrated stock, tax loss harvesting, social awareness, or religious concerns can all be addressed. If necessary, we can create a truly bespoke portfolio.
  3. Tell us how many indexes you intend to use.  It is important upfront because it allows us to avoid unnecessary duplication of sectors when building your global portfolio, and to keep the portfolio of manageable size.