Direct Indexing

What is direct indexing?

Direct Indexing is an investment approach that enables investors to own the individual stocks of an index, rather than purchasing an ETF or mutual fund. This provides greater flexibility to tailor portfolios based on personal financial goals, tax strategies, and ethical preferences. 

SEI Systematic Core Strategies

The SEI Systematic Core Strategies are direct indexing solutions crafted to hold the underlying securities that mirror the attributes of a selected index, providing enhanced transparency and a more individualized approach to investing. 

Potential benefits of direct indexing

The strategies deliver a range of potential benefits to investors, including:

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Cost efficiency

With the enablement of commission-free trading, and investment strategies fundamentally designed to align with an index, strategies are passively managed with respect to an index, rather than actively picking stocks.

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Control

Separately Managed Accounts and Unified Managed Accounts can be funded with cash or existing investor securities. This “in-kind transition” enables investors to shift their portfolios to a new strategy without the tax consequences of liquidating highly appreciated securities.

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Transparency and direct ownership

Rather than holding a share in a pooled vehicle like a mutual fund or ETF, investors own the individual stocks and bonds in their accounts. Securities are purchased and sold for that individual account.

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Tax optimization

Direct ownership of securities means clients can benefit from ongoing, systematic tax-loss harvesting. Capital losses realized in an SMA provide the opportunity to offset gains realized elsewhere in the portfolio, plus other strategies.

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Personalization

Separately Managed Accounts and Unified Managed Accounts offer the ability to truly personalize all aspects of a portfolio to align with an investor’s priorities and needs.

SEI Systematic Core Strategies allow for a more customized investment experience.

Important Information

Investment services are provided by SEI Investments Management Corporation (SIMC). SIMC is a wholly owned subsidiary of SEI. Your financial advisor is not affiliated with SEI or its subsidiaries. The Investment Management Unit is a team within SIMC. 

For those portfolios of individually managed securities, SIMC makes recommendations as to which manager will manage each asset class. SIMC may recommend the termination or replacement of a money manager and the investor has the option to move the account assets to another custodian or to change the manager as recommended.

Please see SIMC’s Form ADV Part 2A (or the appropriate wrap brochure) for a full disclosure of the fee schedule. 

Tax and Tax Management Techniques Disclosures – SIMC does not represent in any manner that the tax consequences described as part of its tax-management techniques and strategies will be achieved or that any of SIMC’s tax-management techniques, or any of its products and/or services, will result in any particular tax consequence. The tax consequences of the tax-management techniques, including those intended to harvest tax losses, and other strategies that SIMC may pursue are complex and uncertain and may be challenged by the IRS. Neither SIMC nor its affiliates provide tax advice.

Please note that (i) any discussion of U.S. tax matters contained in this communication cannot be used by you for the purpose of avoiding tax, penalties and/or interest which may be imposed by the IRS or any other taxing authority; (ii) this communication was written to support the promotion or marketing of the matters addressed herein; and (iii) you should seek advice based on your particular circumstances from an independent tax advisor. Accordingly, Clients should confer with their personal tax advisors regarding the tax consequences of investing with SIMC and engaging in the tax-management techniques described herein (including the described tax loss harvesting strategies) based on their particular circumstances.

There are risks involved with investing, including loss of principal. There is no assurance the goals of the strategy discussed will be met nor that risk can be managed successfully. Tracking error risk is the risk that the performance of a portfolio designed to track an index may vary substantially from the performance of the benchmark index it tracks as a result of cash flows, portfolio expenses, imperfect correlation between the portfolio’s and benchmark’s investments and other factors. This risk is magnified when sampling a benchmark index as the strategy may not track the return of its benchmark index as well as it would have if the strategy purchased all of the securities in its benchmark index.

International investments may involve risk of capital loss from unfavorable fluctuation in currency values, from differences in generally accepted accounting principles or from social, economic or political instability in other nations. Bonds and bond funds are subject to interest rate risk and will decline in value as interest rates rise. There is no guarantee that the Fund’s income will be exempt from federal or state income taxes. Capital gains, if any, are subject to capital gains tax. Income from municipal bonds may be subject to the alternative minimum tax. A company may reduce or eliminate its dividend, causing losses to the investment. Environmental, social and governance (ESG) guidelines may cause a manager to make or avoid certain investment decisions when it may be disadvantageous to do so. This means that these investments may underperform other similar investments that do not consider ESG guidelines when making investment decisions. ESG and Sustainability are not uniformly defined across the industry.

SMAs are offered through Managed Account Solutions.