Investment Giant Vanguard Buying JustInvest to Help Advisers Customize Portfolios

Vanguard Group is buying JustInvest LLC, a smaller investing upstart that helps financial advisers build personalized portfolios.

The deal marks the first ever corporate acquisition by the world’s second-largest asset manager since Vanguard’s start in the 1970s. It brings together companies with radically different businesses: Investment giant Vanguard is best known for funds that track indexes. JustInvest provides tools for investors and advisers to build bespoke portfolios.

The purchase gives Vanguard another way to deepen ties with advisers. Vanguard oversees some $7.9 trillion in assets. Of that, about $3 trillion has already come into Vanguard through advisers, brokerages and other such middlemen.

Vanguard expects to announce its agreement to buy JustInvest as soon as Tuesday. Vanguard will gain over a dozen new employees and roughly $1 billion in assets managed by JustInvest through the purchase. It couldn’t be learned how much Vanguard is paying for the company.

Financial advisers using JustInvest’s software can, for example, quickly screen out oil polluters, take bigger positions in gun makers or automate the task of optimizing after-tax returns. Each client’s investments can then be managed separately. JustInvest’s legal name is one word, however the firm more commonly goes by Just Invest as two words.

The acquisition is part of Vanguard Chief Executive

Tim Buckley’s

push to reshape the Malvern, Pa., company beyond an index firm. Founded by index pioneer

Jack Bogle,

Vanguard revolutionized how America invests with funds that track markets at a fraction of what stock-and-bond pickers charge. But index funds are becoming an ever cheaper commodity, putting pressure on Vanguard to find other ways to differentiate itself from rivals.

Mr. Buckley wants to reach investors who aren’t content to just track indexes and want their money invested in line with their beliefs and needs. Since he rose to CEO in 2018, he has pushed Vanguard to expand robo advice offerings and offer private equity.

In 2019, he expressed curiosity about direct indexing, the business of creating personalized indexes for investors’ specific needs. At a news briefing, he said that direct indexing was “a technology to watch,” but cautioned it has to be low-cost before it is widely adopted.

Since 2020, Vanguard has worked with Just Invest to pilot technology for a small group of advisers.

Vanguard has company in its aim to build more bespoke investment options.

Morgan Stanley

set off an arms race in 2020 with its planned acquisition of Eaton Vance. The purchase gave it direct indexing business Parametric Portfolio Associates LLC. Shortly after,

BlackRock Inc.

said it was buying Aperio Group LLC, a firm that helps build custom portfolios for wealthy individuals, for $1.05 billion. BlackRock on Tuesday said it would partner with SpiderRock Advisors to offer advisers ways to tailor options strategies. BlackRock also is making a minority investment in that firm.

Just Invest was founded in 2016 by Jonathan Hudacko, who previously worked at index construction firm MSCI Inc. and systematic active equity manager Pluribus Labs. The firm drew interest from potential acquirers in the past year.

The team behind Just Invest will keep a presence in its home base of Oakland, Calif., after the acquisition is planned to close in late 2021.

“We’re excited to offer advisers additional capabilities to build more personalized portfolios that better reflect client values, financial objectives, and tax needs,” said

Tom Rampulla,

managing director for Vanguard Financial Advisor Services division.

Vanguard will provide Just Invest’s technology to advisers at first. The asset manager will explore ways to bring those tools to more investors later.

It is pushing into a small but growing part of the asset-management industry: Direct indexing is expected to control $1.5 trillion of assets by 2025, up from below $500 billion last year, according to a projection by Morgan Stanley and Oliver Wyman.

Owned by investors in its U.S. funds, Vanguard has never done an acquisition. It must keep reinvesting any returns for its clients and lowering the cost of investing for its shareholders.

Vanguard has explored acquisitions before: When Barclays PLC tried to sell its asset-management arm Barclays Global Investors in the aftermath of the last financial crisis, Vanguard briefly looked at a deal, said people familiar with the matter. BlackRock ultimately bought BGI in 2009, transforming itself into an indexing and exchange-traded-fund giant.

Like other asset managers, Vanguard took in less net new money in 2020 than the prior year as the pandemic roiled markets. The slowdown prompted asset managers across the industry to think about partnerships, tie-ups and acquisitions to reach new customers and wield more influence among existing ones.

Write to Dawn Lim at

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