Create customized portfolios with direct indexing

Learn how index portfolios can be customized for environmental, social, religious, or investment reasons, using positive and negative screening techniques.

Kevin Maeda, Chief Investment Officer of Active Index Advisors®, explains how active screening techniques can be used to customize investor portfolios for ESG, religious or other personal reasons.

  • Indexing is a popular strategy, but many investors would prefer not to own some of the companies in traditional indexes.
  • Direct indexing allows investors to create a personalized index in a separately managed account (SMA).
  • Active screening can exclude specific securities by name, selected industries within a sector, or entire market sectors.
  • Direct indexing can also support environmental/social/governance investing by including certain companies or sustainable industries through positive screening based on ESG ratings.
  • Other uses include reducing overlapping risk for investors who have large individual stock positions and factor tilting to favor momentum, value or dividend yield.
Separately managed accounts (SMAs) are investment portfolios owned by an investor and managed by a professional investment firm.

All investing involves risk, including the risk of loss.

The views and opinions expressed may change based on market and other conditions. This material is provided for informational purposes only and should not be construed as investment advice. There can be no assurance that developments will transpire as forecasted. Actual results may vary.

Sustainable investing focuses on investments in companies that relate to certain sustainable development themes and demonstrate adherence to environmental, social and governance (ESG) practices; therefore the universe of investments may be limited and investors may not be able to take advantage of the same opportunities or market trends as investors that do not use such criteria. This could have a negative impact on an investor's overall performance depending on whether such investments are in or out of favor.

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