How Direct Indexing Portfolios Are Customized
Discover how Allspring's direct indexing separately managed accounts (SMAs) can be tailored through security exclusions, faith-based screens, index blending, and dividend tilts.
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8/19/2026
14 min read
Topic
Direct Indexing
Key takeaways
- Direct indexing seeks to track the performance of a chosen index by owning individual securities in a SMA.
- Unlike funds, direct indexing allows an investor to directly own the securities, which allows for more customization options.
- Investors can personalize eligible strategies with values-based screens, specific exclusions, index blends, and dividend-focused options.
Executive Summary
Build a portfolio around your preferences
Direct indexing allows investors to customize eligible portfolios in ways that may not be available through traditional investment products. Depending on the strategy, investors can exclude specific securities or industries, incorporate faith-based screens, blend multiple indexes within a single portfolio, or pursue a dividend-tilt approach focused on higher-yielding companies. These customization options may help create a portfolio that better reflects an investor's priorities while maintaining broad market exposure.
Explore Allspring’s customization options
The table below highlights the customization features available across Allspring's direct indexing SMA lineup.
| EQUITY CUSTOMIZATION OPTIONS | |||||
| SMA STRATEGY NAME | PROFILE | SECURITY/INDUSTRY | FAITH-BASED | BLEND ELIGIBLE* | DIVIDEND-TILT |
| SMArt Large Core 500 | Large core | • | • | • | • |
| SMArt Large Core 500 ESG- Screened |
ESG-screened large core | • | • | • | |
| SMArt Large Blend 1000 | Large blend | • | • | • | |
| SMArt Large Growth 1000 | Large growth | • | • | • | |
| SMArt Large Value 1000 | Large value | • | • | • | |
| SMArt All Cap 3000 | All cap | • | • | • | • |
| SMArt International Core | Developed non-U.S. ADR | • | • | • | |
| SMArt Emerging Markets | Emerging markets ADR | • | • | • | |
*Note: Not all customization options for direct indexing strategies may be available at all firms. Please contact your financial advisor to learn more. Index blends are available that combine Large Core 500 or All Cap 3000 indexes, with one or both of International Core and Emerging Markets indexes. Starting minimum weight is 10% in any index and weight customizations must be in increments of 5% thereafter.
Common questions about direct indexing
- What is a separately managed account (SMA)?
Separately managed accounts (SMAs) are professionally managed investment portfolios designed for individual investors. Unlike mutual funds or exchange-traded funds (ETFs), SMAs allow investors to directly own the underlying securities, such as stocks and bonds. This structure can provide significant advantages, including customization, tax efficiency, transparency, and flexibility, making SMAs a potentially viable option for those seeking personalized and tax-smart investment strategies. Read our SMA overview.
- How do SMAs differ from mutual funds and ETFs?
SMAs provide direct ownership of individual securities, often enabling greater personalization and more robust tax management than pooled vehicles like mutual funds or ETFs by allowing for portfolio customization and tax‑loss harvesting at the individual security level. Allspring’s SMAs are designed for investors seeking a more defined experience, with enhanced transparency, customization options, and ongoing tax management. Learn more in Allspring’s detailed overview of SMAs, ETFs, and mutual funds.
- Who benefits from direct indexing?
Direct indexing may benefit many investors but may be of particular interest to high‑net‑worth individuals with sizable taxable portfolios—especially those in higher tax brackets, where tax‑loss harvesting can meaningfully improve after‑tax returns. It also helps investors address customization needs such as values preferences and concentrated stock positions. In addition, financial advisors and institutions may benefit by delivering more personalized, tax‑efficient solutions to their clients.
- What is tax-loss harvesting?
Tax-loss harvesting is a tax-efficient investment strategy that involves selling securities that have declined in value and using those losses to offset capital gains and reduce tax liability. Proceeds from the sale are then reinvested in similar securities to maintain market exposure while avoiding wash-sale rules. Any losses harvested but not used in the current year can be carried forward to offset capital gains in future tax years. Direct indexing provides tax benefits by enabling security‑level tax‑loss harvesting, allowing investors to capture losses throughout the year instead of only at the fund level. Learn more about the tax benefits of direct indexing.
Related insights
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