Overview & Benefits

Technology-enabled customization

With Factor Tilts, Aperio offers investors a unique approach that replicates alpha-seeking strategies in separately managed accounts (SMAs) with the advantages of traditional indexing. Aperio provides investors with transparency, tax-efficiency, and lower cost through portfolios constructed to their specifications. Strategies that were once considered the domain of tax-inefficient, high-priced active managers can now be captured more precisely using underlying risk factors and passive portfolio techniques.

Client strategy, Aperio implementation

We follow a disciplined yet flexible process that allows us to engineer portfolios of individual stocks in SMAs to clients’ unique specifications. For example, a client may want high quality, value, momentum, or low volatility. Aperio works with clients to implement their desired tilts with precise risk control, whether it is tracking error or total portfolio standard deviation. Unintended factor tilts are controlled to minimize long-term drag on performance.

Once a client defines an investment strategy, we map the strategy onto a multi-factor risk model, expressing the strategy as a set of risk-factor targets. Risk factors may include tilts towards select geographies, sectors, or styles. Each factor may be overweighted, underweighted, or excluded from the portfolio entirely.

Applying insight: SMAs or ETFs?

Aperio’s Factor Tilts offer investors the cost-efficiency of exchange traded funds (ETFs) in a fully customizable, liquid, and tax-efficient format. While ETFs cover a variety of index strategies, they are not customizable and an investor must find the best-fit product. For example, if an investor wants a strategy with both low-volatility and a value tilt, they may need to combine two ETFs, one that offers a low volatility strategy and another that targets value. Aperio constructs one SMA that combines both tilts. Another advantage is that an SMA accesses the liquidity of the underlying securities directly.

The bottom line

Our transparent and rules-based Factor Tilts provide investors and their advisors with the ability to create portfolios as they wish, using pre-designed strategies or their own custom factor tilts.

Hypercustomization

Factor Tilts can be combined with Socially Responsive Indexing/ESG and Active Tax Management to provide a truly customized solution.

All investments involve risk, including loss of principal invested. Past performance does not guarantee future performance. Individual client accounts may vary. The strategies and/or investments referenced may not be suitable for all investors as the appropriateness of a particular investment or strategy will depend on an investor’s individual circumstances and objectives. Please refer to the "Disclosure" link below for additional information.