Rethinking Portfolios: A Visual Guide to Direct Indexing
Connect with us

Sponsored

Rethinking Portfolios: A Visual Guide to Direct Indexing

Published

on

The following content is sponsored by MSCI.

A Visual Guide to Direct Indexing

Like many other industries, creating custom experiences has become the standard—and investing is no exception.

Direct indexing allows investors to create a personalized index that offers direct ownership of relevant investments. Given the diverse set of client needs, a direct index offers one avenue to meet each investor’s unique objectives. Reducing taxes and boosting ESG metrics in a portfolio are among just a few.

In this graphic from MSCI, we show how direct investing works, and the opportunities it offers.

Direct Indexing, Explained

To start, direct indexes are one way for investors to create a custom index in separately managed accounts. In that account, an investment firm will oversee a portfolio of assets.

Advisors can help clients decide the number of holdings, ESG screens, or sector inclusions that more closely align with their needs.

The benefit of using this approach is that investors have direct ownership of these holdings, which allows for certain tax advantages. This is in contrast to mutual funds, which are pools of assets owned by a number of investors. Through direct indexing, for instance, an investor could apply tax-loss harvesting by selling securities at a loss to reduce their capital gains tax.

At the same time, direct indexes can use analytics and risk modeling to identify the drivers of risk and return. In short, direct indexing gives investors access to tools that power portfolio construction and performance measurement.

How to Leverage Direct Indexing

Let’s say an investor wants to build an index with the following features:

  • Improved ESG score
  • Lowered risk
  • Increased global exposure
  • Reduced tax burden

Using direct indexing, they can choose which objectives align most closely to their needs. For example, they may choose from the following investment exposures:

ESG & ClimateRegionalRiskThematic
Low Carbon
ESG Leaders
Climate Change
Women’s Leadership
Asia
Europe
Global
U.S.
Minimum Volatility
Momentum
Quality
Value
Genomic Innovation
Robotics
Digital Economy

Consider the investor who’s specifically looking to reduce the carbon exposure of their portfolio by 30%.

Since the investor wants to improve their ESG score, they could consider a Low Carbon index which has a mandate that may align with these goals. Let’s say, they also wanted to invest in companies that have a greater focus on the ‘G’, or governance side of environmental, social, and governance (ESG) investing. In this case, they may choose to blend their exposure with a Women’s Leadership index.

Suppose the investor is risk averse and wanted a portfolio with lower volatility. Through utilizing sophisticated risk models and analytics, the index could integrate a Minimum Volatility index to help manage their desired risk.

The Direct Indexing Toolkit

Direct indexing provides a set of tools for investors to use to their advantage. Primarily, these could consist of:

  • ESG metrics: Carbon Portfolio Analytics, measuring alignment to the UN Sustainable Development Goals, insights on ESG risks and opportunities
  • Risk optimization: Efficient frontiers, mean-variance optimization, max Sharpe ratio or information ratio
  • Tax optimization: Tax aware portfolio construction, tax-loss harvesting, maximizing post-tax returns

Through an efficient frontier, an investor can identify investments that have the highest returns for an identified level of risk. Mean-variance optimization is another type of investment tool that helps investors achieve the optimal level of risk and return, by dispersing the risk across their portfolio.

With an expansive set of index products, 24-hour service, and dedicated research team, MSCI works hand-in-hand with investors to build their desired portfolios.

Click for Comments

Sponsored

Value in the Ground: Cartier Resources’ Chimo Mine Project

Cartier Resources (TSX-V: ECR) is advancing the Chimo Mine Gold Project in the Abitibi region of Quebec, showing its potential with past producing mines.

Published

on

Value in the Ground: Cartier Resources’ Chimo Mine Project

The sponsor of this graphic, Cartier Resources (TSX-V: ECR), has instigated an exploration strategy to increase ounces in the ground at the historic Chimo Mine in the heart of the Abitibi that continues to deliver increasing resources.

Cartier is deploying the strategy in the right region, with the right backers to find gold faster at a lower cost. This graphic provides an overview of the project’s massive potential.

Proven Endowment: The Abitibi Greenstone Belt

There are many prolific past-producing gold districts in Canada, but the Abitibi is one of the largest and well understood gold-bearing regions with readily available exploration infrastructure.

This region extends from Wawa in Northwestern Ontario to the East near Val-d’Or, Québec—a landscape that hosts some of the most productive gold mines in Canada.

Cartier’s Chimo Mine project located in the historic Abitibi Greenstone belt of Québec builds on a legacy of gold production with a project ready for investors.

Tried and Tested Exploration Strategy

The best place to find gold is where companies discovered and mined it before. Between 1964 and 1997, three companies produced 379,012 ounces of gold at the Chimo Mine.

This type of strategy is known as brownfield exploration. Brownfield exploration looks for gold in areas known to host gold mineralization. It offers investors less risk, reducing the amount of uncertainties a company faces.

Ounces in the Ground: Growing a Gold Resource

Cartier delivered its first-ever resource estimate within three years and proved the value at Chimo. In November 2019, the company published its first mineral resource estimate of the central gold corridor on the Chimo Mine property.

It reported Indicated resources of 481,280 ounces of gold and Inferred resources of 417,250 ounces of gold. This resource estimate came from only one-third of the property.

This was just the beginning for Cartier Resources and the Chimo Mine.

In 2021, Cartier upgraded its resource estimate with drilling from its North and South corridor. The company increased the indicated resources to 684,000 oz Au (6,616,000 tonnes at 3.21 g/t Au) and the inferred resources to 1,358,000 oz Au (15,240,000 tonnes at 2.77 g/t). This gives the property over 2 million ounces of gold in the heart of the Abitibi.

Why Invest in Chimo?

Cartier Resources has consistently applied an exploration strategy to develop and increase the known gold resources at the Chimo gold mine.

It built on the foundations of a proven past producer and continued exploration success to discover more gold. In the heart of a safe and established mining jurisdiction, Cartier has put the Chimo Mine back on the Abitibi gold map.

Continue Reading

Sponsored

Visualizing the Rise of Cryptocurrency Transactions

As cryptocurrency transactions rise, merchants are looking to position themselves to take advantage of this new wave of crypto spenders.

Published

on

daily crypto transactions

Visualizing the Rise of Cryptocurrency Transactions

After Bitcoin and cryptocurrency’s wild bull run in late 2020 and early 2021, many holders are now using cryptocurrencies for their intended purpose: payments.

Every day, approximately $12 billion are transferred across the Bitcoin, Ethereum, and Litecoin blockchains, with millions of people using cryptocurrency for payments daily.

This graphic sponsored by CoinPayments looks at the rising transactions of the Bitcoin, Ethereum, and Litecoin networks.

Cryptocurrency Transactions are Rising in Value and Number

While prices are often the focus when crypto is in the spotlight, transaction counts show how much a network is being used as a medium of exchange. In just over five years, daily transactions across the Bitcoin, Ethereum, and Litecoin networks increased sixfold, from just 250,000 to more than 1.5 million transactions a day.

In mid-2017, Ethereum overtook Bitcoin in daily transactions as ETH was necessary to participate in ICOs (initial coin offerings), which fueled much of the speculation in the 2017 price run. With Ethereum still hosting thousands of ERC-20 and ERC-721 tokens on its blockchain today, its transaction counts have grown to be much higher compared to Bitcoin and Litecoin’s.

Along with crypto’s rising transaction numbers, the average USD value per transaction has increased by a minimum of 4x over the past five years.

YearAverage Value per Bitcoin TransactionAverage Value per Ethereum TransactionAverage Value per Litecoin Transaction
2016$2,426$588$1,357
2021$32,943$19,139$5,458

Source: Coin Metric
2021 figures as of July 13th, 2021

Crypto Spenders are Searching for Merchants

As transaction counts and values rise, merchants play a vital part in pushing forward the adoption of digital currencies for payments.

Many cryptocurrency users consider merchant adoption as a key barometer of success for crypto adoption. While companies like AT&T, Namecheap, and Overstock already accept crypto payments, there are still many businesses around the world which don’t offer cryptocurrency as a method of payment.

In a survey of over 8,000 U.S. consumers, 66.7% of crypto owners and 54.2% of non-owners said that not enough merchants accept cryptocurrency. Along with this, 47% of crypto owners said they seek out merchants that accept crypto for purchases, indicating clear demand for more crypto-accepting businesses.

How Can Merchants Make the Most of the Crypto Boom?

As the world embraces crypto, merchants need the in-store and online tools to be part of this next wave of commerce. Accepting crypto opens merchants up to an untapped audience of new consumers, eager to spend their crypto.

CoinPayments makes it easy to start accepting crypto payments at online checkout and with POS systems, with features like auto-coin conversion and over 2,000 coins supported.

Find out more about how the crypto market is growing, adapting to consumer needs, and the opportunity it presents to merchants around the world.

Continue Reading

Subscribe

Popular