They may not realize it, but the Sussexes just joined one of the hottest trends on Wall Street.
The freshly minted “impact partners” in the more than $1 billion asset manager Ethic are the latest members of the bespoke indexing movement that’s reshaping the U.S. investment industry. The fintech firm, in which Prince Harry and Meghan Markle are investors, builds custom indexes to ride the boom in environmental, social, and governance investing.
As new technology and cheaper trading proliferate, money managers are betting the next big thing is offering clients the benefits of indexing -- like cheap trading costs and diversification -- tailored to specific tastes.
In the past few weeks alone, Franklin Resources Inc. bought $6.4 billion money manager O’Shaughnessy Asset Management, including the firm’s custom-indexing business known as Canvas, while quant giant Dimensional Fund Advisors slashed the minimum for its separately managed accounts, or SMAs.
That all followed Vanguard’s purchase of direct indexer Just Invest in July -- the asset giant’s first-ever acquisition.
“The technology behind direct indexing is making the investment minimums and costs of running these accounts fall like a rock,” said James Seyffart, an ETF analyst at Bloomberg Intelligence.
Morgan Stanley spent $7 billion on Eaton Vance Corp. last year, which owned Parametric Portfolio Associates -- one of the heavyweights in direct indexing. BlackRock Inc.’s $1 billion purchase of Aperio, a creator of tailored index strategies, quickly followed.
