10 Years of Direct Indexing Innovation on Envestnet's Industry Leading Platform - Driving Advisor Growth and Productivity with more than $9B in Assets

Rhea-AI Summary

Envestnet, Inc. celebrates the 10th anniversary of its Quantitative Portfolios, becoming one of the largest direct index separately managed account providers with over $9 billion in assets. The company offers passive strategies combining tax management and customization, catering to advisor and investor needs.

Insights

Financial Analyst

The announcement of Envestnet's growth in direct index separately managed account (SMA) offerings over the past decade signifies a substantial shift in investment strategy preferences among advisors and their clients. The increase to over $9 billion in assets under management (AUM) for their Quantitative Portfolios (QPs) reflects a broader industry trend towards personalized investment solutions. This trend is primarily driven by the demand for tax efficiency and alignment with personal values, which traditional passive investments may not adequately address.

Direct indexing allows investors to own individual securities that replicate an index, enabling more control over tax management through strategies like tax-loss harvesting. The adoption rate of such strategies suggests that Envestnet's platform is well-positioned to capture market share in the growing space of customized investment solutions. This could potentially lead to an increased revenue stream for Envestnet, stemming from both management fees and the utilization of their integrated technology platform by advisors.

Market Research Analyst

Envestnet's announcement highlights the burgeoning demand for direct indexing, a service that has gained traction for its ability to offer customization and tax optimization. The company's focus on innovation and integration with advanced technology platforms is a strategic move to differentiate itself in the competitive wealth management industry. The integration of such services is likely to attract a segment of investors who are increasingly looking for personalized investment strategies that align with their individual tax circumstances and values.

Envestnet's positioning as one of the largest providers in the direct indexing space could influence competitors to enhance their offerings, potentially leading to an industry-wide increase in the quality and variety of financial products available to investors. This could alter the competitive landscape and might lead to consolidation in the market as firms attempt to scale up to meet the evolving demands of investors.

Tax Specialist

The significance of Envestnet's QPs lies not just in asset management but also in the sophisticated tax management strategies they enable. Direct indexing solutions like QPs facilitate granular control over the tax implications of investments, allowing for individualized tax-loss harvesting opportunities. This approach can be particularly beneficial in volatile markets where the ability to offset gains with losses can result in a more favorable tax outcome for the investor.

For advisors, the ability to offer such tax-efficient strategies can serve as a value proposition, potentially attracting high-net-worth individuals who are more sensitive to tax implications on their investment returns. Envestnet's decade-long experience and substantial AUM in this area suggest a proven track record that could reassure both advisors and clients considering direct indexing strategies.

Since Launching in 2013, Envestnet Is Now One of the Largest Direct Index Separately Managed Account Providers, Offering Clients a Passive Strategy that Combines Tax Management and Customization Amid Surging Adoption and Demand

BERWYN, Pa., Feb. 28, 2024 /PRNewswire/ -- Envestnet, Inc. (NYSE: ENV), a leading provider of integrated technology, intelligent data and wealth solutions, recently celebrated the 10th anniversary of the launch of its Quantitative Portfolios (QPs), the company's internally managed direct indexing solutions for advisors available on its industry leading platform. First made available in 2013 to provide clients with a passive strategy that combined tax management and customization, today Envestnet is one of the largest direct index separately managed account providers, with more than $9 billion in QP assets as of the fourth quarter of 2023.   

"We continue to serve more and more advisors as they address important investor needs on the industry's most advanced and integrated technology platform. Since we launched our very first QP ten years ago, direct indexing has become the most popular separate account strategy across our ecosystem," said Brandon Thomas, Envestnet's Co-Founder and Co-Chief Investment Officer. "As advisors look to customize their client's portfolios through solutions such as tax management and values alignment, our QPs address needs that are often overlooked by 'one-size-fits-all' passive investments. Taking this one innovative step further, since the inception of the QPs we have created custom index strategies for clients seeking to achieve a variety of objectives."

Created to offer advisors in Envestnet's ecosystem access to direct indexing solutions for clients, Envestnet's QPs are a suite of asset class-specific investments that blend the benefits of "beta" investing with the portfolio customization of managed accounts. For more information about Envestnet's QPs, which are managed by the company's quantitative asset management unit, QRG Capital Management, Inc., please visit: https://www.envestnet.com/qrg/.

Over the past three years, Envestnet's QPs offering has grown by 40 percent annually in accounts and advisors. According to Cerulli, total direct index industry assets were $434 billion at the end of 2022, and they expect direct index assets to grow at a 12% clip over the next four years – outpacing the growth of mutual funds and ETFs over that same period[1].

Envestnet offers four varieties of QPs, each aiming to improve after-tax and risk-adjusted results—in a cost-effective manner.

• Market Series Quantitative Portfolios: Market Series QPs feature low-cost access to important market segments coupled with opportunities for customization and tax management.
• Factor-Enhanced Quantitative Portfolios: Factor-Enhanced QPs provide the potential for excess returns via increased exposure to prominent asset pricing factors such as value, momentum, quality, and low volatility factors.
• Sustainable Quantitative Portfolios: Sustainable QPs explicitly focus on companies with high sustainability ratings and/or environmental, social, and governance priorities.
• Fixed Income Quantitative Portfolios:  Fixed Income QPs contain a subset of the constituents in the investment-grade bond universe and are constructed to provide consistent income generated from a diversified set of securities.

"Over the past decade, Envestnet has remained one step ahead of the ongoing evolution of direct indexing solutions – providing these solutions on the industry's leading technology platform to drive advisor growth and productivity," said Dana D'Auria, CFA, Co-Chief Investment Officer and Group President of Envestnet Solutions. "We are proud to celebrate 10 years of offering QPs, our direct indexing solutions, to advisors in our ecosystem. Over the past few years alone we have seen a surge in demand for these products, in line with overall industry trends, and we expect this growth to continue going forward."

ABOUT ENVESTNET

Envestnet is helping to lead the growth of wealth managers and transforming the way financial advice is delivered through its ecosystem of connected technology, advanced insights, and comprehensive solutions – backed by industry-leading service and support. Serving the wealth management industry for 25 years with more than $5.8 trillion in platform assets—more than 108,000 advisors, 16 of the 20 largest U.S. banks, 48 of the 50 largest wealth management and brokerage firms, more than 500 of the largest RIAs -- thousands of companies, depend on Envestnet technology and services to help drive business growth and productivity, and better outcomes for their clients.  Data as of 12/31/2023.

Envestnet refers to the family of operating subsidiaries of the public holding company, Envestnet, Inc. (NYSE: ENV). For a deeper dive into how Envestnet is shaping the future of financial advice, visit www.envestnet.com. Stay connected with us for the latest updates and insights on LinkedIn and X (@ENVintel).

1. Cerulli's US Managed Accounts 2023 Report, Direct index assets totaled $546.7B at 9/30/31, per Cerulli Managed Accounts Edge 4Q23

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SOURCE Envestnet

FAQ

What is Envestnet's ticker symbol?

Envestnet's ticker symbol is ENV.

What are Envestnet's Quantitative Portfolios (QPs)?

Envestnet's QPs are internally managed direct indexing solutions for advisors, providing passive strategies combining tax management and customization.

How much in assets does Envestnet's Quantitative Portfolios have?

Envestnet's QPs have over $9 billion in assets as of the fourth quarter of 2023.

Who is Brandon Thomas?

Brandon Thomas is the Co-Founder and Co-Chief Investment Officer of Envestnet.

What benefits do Envestnet's Quantitative Portfolios offer?

Envestnet's QPs blend the benefits of 'beta' investing with portfolio customization, catering to advisor and investor needs.