This story first appeared in Financial Advisor IQ's sister publication, Ignites.
First Trust Capital Partners will acquire Veriti Management, a direct indexing-focused asset manager with $1 billion in assets under management, the companies announced Wednesday.
Through the deal, First Trust will add direct indexing capabilities to its platform, the announcement said.
“Tax-loss harvesting opportunities are top of mind in the midst of this bear market, and First Trust sees that,” a First Trust spokesperson said. “These are just two of the driving forces in acquiring Veriti.”
The transaction is expected to close on July 31, the announcement said. Terms of the deal were not disclosed.
The acquisition will result in no personnel changes at either First Trust or Veriti, the spokesperson confirmed.
Custom indexing allows advisors to deliver highly customized and tax-advantaged solutions that better align with clients’ investment objectives, values and interests, said Ryan Issakainen, senior vice president and ETF strategist at First Trust.
Veriti’s approach to direct indexing focuses on providing tax-efficient and values-based investing solutions to institutions and wealth management firms, the announcement said. In February, the four-year-old firm launched Console, a new user interface that makes it easier for clients to open, fund and personalize investment accounts, the company spokesperson said.
Many large asset manager have recently snapped up direct indexing technology.
Last year, BNY Mellon’s Pershing announced that it would buy direct indexer Optimal Asset Management, Franklin Templeton acquired direct indexing-related quant shop O’Shaughnessy Asset Management, Vanguard scooped up Just Invest, and JPMorgan Chase bought custom indexing provider OpenInvest.
In January, meanwhile, UBS announced that it would buy Wealthfront for $1.4 billion, largely motivated by the robo-advisor’s direct-indexing technology, the company said at the time. The deal is expected to close by the end of 2022.
And last month, Fidelity said it would roll out a digital direct-indexing tool that will require only $1 in assets. That tool carries a monthly fee of $4.99.
Veriti does not “generally” require a minimum account size, a filing shows. However, annual advisory fees range from 20 basis points to 50 bps, “depending on factors such as the type and complexity of the investment management strategy employed, the use of subadvisors, and the size of the account or overall client relationship,” the filing says. The minimum fee is $2,000 for individuals and $5,000 for institutional clients.
First Trust, through First Trust Advisors, had $203 billion in assets under management as of May 31, the announcement said. Its ETFs had $128.0 billion in assets as of June 30, according to Morningstar Direct. Together those funds added $16.0 billion in net inflows during the year ended last week.
First Trust also had four mutual funds that had $2.1 billion in assets as of May 31, according to the Chicago-based researcher. Combined, the funds added $1.1 billion in net inflows during the year ended that day.