In yet another example of the growing market for direct indexing, Parametric Portfolio Associates, the direct indexing business owned by Morgan Stanley following its purchase of Eaton Vance, has launched a product that extends the firm's offerings of tax-managed solutions for separately managed accounts (SMAs) to portfolios of $100,000 or more. The minimum for Parametric Tax Harvest Core is lower than that of most tax-managed custom SMAs available in the market today.
"We are introducing Tax Harvest Core to bring the benefits of tax-managed custom SMAs to more advisors and a greater number of their clients," said Rob Ciro, managing director, product management at Parametric, in a statement. "The end result we seek is better aftertax returns for clients."
The Harvest Core product provides ongoing tax management and sector-level customization to two large-cap strategies: one benchmarked to the S&P 500, composed of the 500 largest U.S. companies, or about 80% of the total U.S. market cap; the other benchmarked to the Russell 3000, made up of the 3,000 largest companies, equivalent to 98% of the total U.S. market cap.
The portfolios invest in sector ETFs and use systematic tax-loss harvesting and other tax management strategies to enhance after-tax performance. Advisors and their clients can customize each portfolio by restricting sectors, funding positions with cash or securities and accessing charitable giving options. On-demand reporting of pre- and after-tax performance, gains and losses and tracking errors versus benchmarks is also available.
Two Actively Managed Bond Funds Launch
Exchange Traded Concepts LLC has launched the Gavekal Asia Pacific Government Bond ETF (AGOV), and OBP Capital's Spinnaker ETF Series has added the VectorShares Min Vol ETF (VSPY), a fixed income alternative. Both are listed on the NYSE.
The Gavekal ETF invests at least 80% of its net assets plus in Asia-Pacific government bonds from approximately 17 countries, including China, India, South Korea, Japan and Vietnam, plus Russia, as well as bonds from supranational entities such as the World Bank, Asia Development Bank and Asian Infrastructure Bank and corporate Chinese bonds through a Bond Connect Co. Ltd. program known as "Bond Connect." That program allows foreign investors such as the fund to invest in such bonds through a Hong Kong account.
The ETF will emphasize bonds with relatively higher yields and seek an average portfolio duration of at least five years. Its expense ratio total fund operating expense is 0.50%. Gavekal Capital Ltd., a limited liability company based in Hong Kong, is the ETF's subadvisor.
The VectorShares Min Vol ETF (VSPY) is a fixed income alternative that invests 90% of its assets in ultra-short duration bond instruments and the remaining 10% in S&P 500 call and put options, which are never net short the market and have a maximum 10% loss. he options, which are automatically balanced based on market levels, utilize their inherent leverage to drive market-like returns while the ultra-short duration fixed income dampens volatility.
As the market increases in price, the long positions are decreased, and vice versa. The ultra-short fixed income component can hold highly rated short-term corporate and muni debt, certificates of deposit and Treasuries. A synthetic Spot VIX portfolio made up of options is designed to offset losses on the long positions in periods of market volatility. The ETF has net annual operating expenses of 1.10%
