Veriti Management, the direct indexing asset technology acquired by First Trust Portfolios last July, will now be known as First Trust Direct Indexing. Robert Hughes, a former chief commercial officer at Alerian (now VettaFi), will serve as the direct indexing subsidiary’s new CEO. He takes over for Veriti co-founder and Managing Partner James Dilworth.
The deal, announced in July, will let First Trust bring direct indexing to its advisor clients, while potentially exposing Veriti to a larger market.
First Trust Direct Indexing CEO Robert Hughes
“This elevated offering comes at a time when advisors, institutions and investors are clamoring for custom indexing solutions that deliver bespoke portfolios with the ability to generate tax alpha,” First Trust said in a statement. “Whether prioritizing traditional factors, risk management strategies, thematic positioning, or values-based investing, advisors, institutions and wealth management firms who partner with First Trust Direct Indexing can completely customize their clients’ exposure to selected benchmarks based on their investment goals and personal values.”
Dilworth and David Beatty, co-founder and managing partner of Veriti, will stay on as managing directors. Dilworth will support the team on strategic growth initiatives and opportunities.
Hughes has many years’ experience in the indexing space. Prior to his time at Alerian and S-Network Global Indexes, he spent nearly 15 years as global head of index and advisor solutions at Nasdaq, leading the global business development of Nasdaq Indexes and Dorsey Wright and Associates’ RIA business. He has launched more than 300 exchange traded products in 23 countries over his career.
Veriti was launched in 2018 by Dilworth, one of WealthManagement.com’s Ten to Watch in 2022, and Beatty, CEO of RIA Daintree Advisors. Beatty had been offering direct indexing to his clients for many years, but he and Dilworth wanted to build a better solution with the advisor in mind, one that would combine technology, values alignment and personalization. The firm has grown to over $1 billion in assets, primarily by referrals; it did not have a sales organization, until First Trust came along. The platform is different from other direct indexers in that it does not rely on one optimization engine or a single data source and works with 12 custodians.
When the acquisition was announced, Dilworth said First Trust would bring a large distribution force, with some 400 wholesalers, as well as credibility in the marketplace, to Veriti.
Last February, Veriti launched a new user interface, Console, meant to speed up the creation of customized equity portfolios. The new interface allows for faster synchronization of an advisor’s client information—including background data like account size, tax rates and risk profiles—with Veriti’s platform and database to decrease the amount of time needed to open and fund an account.
Direct indexing continues to be a hot area of development and acquisition in the asset management space. Cerulli Associates estimates direct indexing assets to grow at a compound annual growth rate of 12.3% over the next five years.
Last week, portfolio management and trading platform Vestmark launched six separately managed account investment strategies. Called "Focused Index Portfolios," the strategies hew to S&P Dow Jones indexes, but in the SMA wrapper to allow for some level of customization and tax-loss harvesting. The firm sees the launch as a first step toward a fully personalizable direct indexing investment platform, which Vestmark expects to roll out later this year.
