San Francisco-based Frec, a direct indexing platform for self-directed investors, has launched a portfolio allocation feature. The new tool enables investors to choose how and when to rebalance portfolios rather than automatically rebalancing.
“For years, robo advisors have promoted the idea of constant rebalancing as the gold standard, but this one-size-fits-all approach often doesn’t align with real-world investor needs,” Frec founder and CEO Mo Al Adham said in a statement. “With our portfolio allocation feature, we’re breaking away from this flawed model. Investors can now rebalance at their own pace, ensuring their portfolios reflect their personal strategies, and with more tax efficient alternatives.”
Frec launched in 2021 and emerged from stealth mode in 2023, backed by $26.4 million in seed and Series A funding led by venture capital firm Greylock. It currently has $170 million in customer assets across its broker/dealer and registered investment advisor entities. The firm uses Apex Clearing for custody.
Assets in direct indexing products are growing at a double-digit annual rate and are poised to reach $800 billion by the end of 2026, according to Cerulli Associates.
Frec contends that automatic rebalancing can lead to “suboptimal performance” because it can require selling “high-performing assets to purchase underperforming ones.” Frec’s portfolio allocation feature instead will enable investors to make one-time cash deposits to solve rebalancing.
As an example, an investor can set a desired portfolio allocation, and Frec offers options such as “sell and buy,” “cash deposit” or “leverage up” to determine when and how to rebalance.
Frec, in its release, argues this flexibility “allows users to avoid the common pitfalls of forced rebalancing, such as realizing unnecessary capital gains or selling high-performing assets when other options exist.”
“By moving away from automatic rebalancing, investors can now approach rebalancing strategically, deciding when it’s the right time to act based on their goals, market conditions, and tax considerations,” Al Adham said in a statement.
