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Paritas Direct Indexing

Custom-built direct investment portfolios that seek to replicate desired market indices.

Our goal is to provide minimal tracking error to the replicated index, plus tax alpha through systematic tax-loss harvesting.

Go Beyond Traditional Structured Investing

Direct Indexing offers investors a way to add benefits to their investment strategy beyond what traditional “structured investments” such as ETFs and mutual funds can offer. Instead of ownership through a pooled intermediary, the investor directly holds the underlying securities that make up an index or outcome-based strategy.

Direct Investing Has Come of Age

With the dawn of commission-free trading, the ability to purchase fractional shares and advances in technology, a new world order has arrived. Paritas now offers actively managed direct indexing portfolios with systematic rebalancing and tax-loss harvesting.

A Repeatable Investment Process

Our quantitative investment process is designed to deliver minimal tracking error, plus after-tax benefits

  • Step 1.

    Determine portfolio objective (track an existing index or build a personal index that reflects the client’s personal preferences) and select desired index or blend of indices.

  • Step 2.

    Apply investment criteria to meet portfolio objective (i.e., minimum of 2% dividend) and restrictions (i.e., S&P 500 but excluding stocks that do not meet ESG requirements).

  • Step 3.

    Systematic tax-loss harvesting provides tax alpha while disciplined rebalancing helps to minimize tracking error.

Systematic Rebalancing Can Add Value

Reduced tracking error to match targeted index performance

Helps maintain alignment to desired index, by sector, or other selected strategy

Portfolio adapts to constantly changing market dynamics

Key Advantages

Direct indexing unlocks powerful customization options advisors can provide to their clients.

  • Incorporate multiple indexes in one portfolio
  • Utilize screens to filter out certain industries and securities in order to express ESG principles
  • Tilt allocations in favor of certain characteristics like investment style (value, growth, dividend) and factors such as momentum and risk

Tax-loss harvesting can produce tax alpha

  • Unlike ETFs or mutual funds, direct indexing provides the opportunity to capture losses in individual securities which can enhance after-tax returns/li>
  • Use losses to reduce exposure in concentrated equity positions with large capital gains
  • Tax alpha has been estimated to add between 1% and 2% in additional after-tax returns for a typical US high-tax bracket investor

A Word About Fees

We understand the impact fees can have on performance, which is why we have structured our fees significantly lower than traditional direct index providers. By leveraging highly defined principles and the power of technology, our fees can be significantly lower than traditional direct index providers.

Contact us to learn more about how Paritas direct indexing strategies can be incorporated into your portfolios.

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