Pershing dives into direct indexing with latest deal

Pershing dives into direct indexing with latest deal
The acquisition of San Jose, California-based fintech Optimal Asset Management meets a growing client need for greater investment customization, according to the company.
DEC 02, 2021

BNY Mellon’s Pershing has become the clearinghouse to acquire a direct indexing technology company, following similar deals made by competing financial services firms like Charles Schwab & Co., BlackRock Inc. and Vanguard Group Inc. earlier this year.

The deal for San Jose, California-based fintech Optimal Asset Management meets a growing client need for greater investment customization, according to BNY Mellon. The technology allows clients to select individual equities in an index, including options to tailor their portfolios for sustainable investments.

“The acquisition of Optimal Asset Management is the latest step in our Pershing X buildout, which aims to fuel growth by helping clients solve the challenge of managing multiple and disconnected technology tools and data sets,” Jim Crowley, Pershing’s CEO, said in a statement.

Pershing X is a recently launched business unit designed specifically to cater to the advisory industry.

“As part of our continued efforts to provide clients with innovative offerings, we’re delighted to now be able to offer Optimal Asset Management’s direct indexing capabilities to our advisory clients within Pershing, as well as to our institutional and retail clients within BNY Mellon’s Investment Management business,” Crowley added.

Terms of the deal were not disclosed.

Direct indexing allows investors to trade weighted baskets of stocks usually built around environmental, social and governance principles and lets them invest in companies that are judged by the client to promote social good.

The strategy currently represents about 22% of the separately managed accounts industry’s total assets, and the growth potential is explosive, according to recent data from Cerulli. The research shows direct indexing currently represents more than $362 billion, but the projected five-year growth rate is 12.4%, ahead of ETFs at 11.3%, SMAs at 9.6%, and mutual funds at 3.3%.

In July, Vanguard acquired the Oakland, California-based platform Just Invest with $1 billion in  managed assets, and in May, Charles Schwab & Co. purchased the recently shuttered robo-adviser Motif. 

Pershing plans to launch the capabilities through Pershing X, as well as to institutional and retail clients within BNY Mellon's Investment Management business, Crowley said.

More advisers are using ESG with clients

Latest News

SEC bars ex-broker who sold clients phony private equity fund
SEC bars ex-broker who sold clients phony private equity fund

Rajesh Markan earlier this year pleaded guilty to one count of criminal fraud related to his sale of fake investments to 10 clients totaling $2.9 million.

The key to attracting and retaining the next generation of advisors? Client-focused training
The key to attracting and retaining the next generation of advisors? Client-focused training

From building trust to steering through emotions and responding to client challenges, new advisors need human skills to shape the future of the advice industry.

Chuck Roberts, ex-star at Stifel, barred from the securities industry
Chuck Roberts, ex-star at Stifel, barred from the securities industry

"The outcome is correct, but it's disappointing that FINRA had ample opportunity to investigate the merits of clients' allegations in these claims, including the testimony in the three investor arbitrations with hearings," Jeff Erez, a plaintiff's attorney representing a large portion of the Stifel clients, said.

SEC to weigh ‘innovation exception’ tied to crypto, Atkins says
SEC to weigh ‘innovation exception’ tied to crypto, Atkins says

Chair also praised the passage of stablecoin legislation this week.

Brooklyn-based Maridea snaps up former LPL affiliate to expand in the Midwest
Brooklyn-based Maridea snaps up former LPL affiliate to expand in the Midwest

Maridea Wealth Management's deal in Chicago, Illinois is its first after securing a strategic investment in April.

SPONSORED How advisors can build for high-net-worth complexity

Orion's Tom Wilson on delivering coordinated, high-touch service in a world where returns alone no longer set you apart.

SPONSORED RILAs bring stability, growth during volatile markets

Barely a decade old, registered index-linked annuities have quickly surged in popularity, thanks to their unique blend of protection and growth potential—an appealing option for investors looking to chart a steadier course through today's choppy market waters, says Myles Lambert, Brighthouse Financial.