Tiger-backed Robinhood rival riffs on direct indexing for DIY investors

What if you wanted to build an index betting on companies traveling to Mars, firms with the most social-media followers, or those with CEOs over six feet tall?
Ideas like these live outside the bounds of traditional index construction on Wall Street — too niche, too speculative. But a new offering from investing platform Public Holdings Inc. is testing whether that kind of demand exists among everyday investors.

Called Generated Assets, it lets users create and backtest custom indexes based on a slew of themes. Soon, they’ll be able to invest in those portfolios directly — and even publish the results to see how the strategies stack up against other offerings from the crowd.

Rich investors are still the target audience for large investment firms pitching tailored portfolios. Public wants to bring that custom-indexing spirit to a wider audience — with ultra-specialized investing — using new advances in artificial intelligence to do the grunt work.

The idea came to Jannick Malling, Public’s co-CEO and co-founder, as he watched the twin boom in exchange-traded funds and AI taking off at once. That convergence sparked a question: why not let users generate their own indexes entirely?

“You’ve seen initially just an ETF for the S&P 500, then thematic ETFs and then even more thematic or niche ETFs,” Malling said in an interview. “If you follow that trend, I think it ends with 100% personalization — that’s what Generated Assets is.”

Malling cites a simple example: Someone might own a popular ETF like Invesco’s QQQ, which tracks the Nasdaq 100. But they may seek to avoid exposure to Costco Wholesale Corp. altogether to amp up the tech concentration of the fund. With Generated Assets, a user could recreate QQQ — minus the famous wholesale retailer. Or they could go further: Double down on AI stocks while sprinkling in a little Bitcoin, and see how that customized mix would have performed historically.

Scaling this kind of concept will be challenging given the entrenched strength of multi-trillion-dollar incumbents. There are already more than 4,000 ETFs in the US alone encompassing all asset classes, and more variations on tried-and-true index-tracking products debut every month. And of course, financial advisers warn retail investors about the dangers of untested investment ideas. 

Brittany Brinckerhoff, financial adviser at Hilltop Wealth Advisors, said that users of the tool should double check the information that the AI is giving them, and cautions against investing a large portion of funds in any one index.

“I would recommend anyone who wants to play around with something new to not put more of your money than you’re willing to lose,” she said.

The New York-based platform has big ambitions. The firm is best known for its Robinhood-like brokerage via a trading app that gives some 3 million users a way to invest in stocks, bonds, ETFs, high-yield savings accounts and more, and has raised over $400 million from investors like Tiger Global. 

Malling, 37, started Public in 2019 with entrepreneur Leif Abraham, offering fractional investing as a way to appeal to everyday investors. Malling previously worked at Saxo Bank, and was on the founding team of CFH Group, a global holding company in the fintech space. 

Generated Assets will be available through the Public website later this year, according to Malling, with the ability for users to invest in the bespoke indexes directly through the platform. And they won’t have to fork over a large sum to put cash behind their ideas — they can buy in via fractional shares. The plan is for the AI to even do the rebalancing work for them, or point out opportunities for tax-loss harvesting. 

Malling declined to disclose how much users will be charged but said the fees will be “competitive” with average charges in the ETF industry. The median expense ratio for passive funds across the US ETF landscape is 0.39%, a figure that rises to 0.69% for active products, according to data compiled by Bloomberg. 

Advances in custom indexing are already bringing personalization to investors with fewer assets. Parametric, the direct-indexing arm of Morgan Stanley Investment Management, brought down some of their investment minimums last year to $100,000 from $500,000, while Fidelity Investments Inc. has introduced a digital retail version of SMA portfolios with an entry point of only $5,000. 

Meanwhile, it remains to be seen just how useful customization and AI will prove for investors over the long term, especially if mainstream equity benchmarks continue to post strong gains in the years ahead. Still, Public’s new venture represents a vision for the future of investing — one that’s AI-assisted and radically personalized.