Portfolio management and trading solutions provider Vestmark has announced that its current CEO, John Lunny, who is also a founder of the company, will step down. In his place, current CTO Michael Blundin, who has worked at Vestmark since 2004, will assume the role of CEO as part of a planned transition. Lunny will remain vice chairman of Vestmark’s board of directors.
Blundin said the succession has been on the cards for some time, but the COVID-19 pandemic has pushed back the timeline. Now that things have stabilized a bit, Lunny said he thinks it is a good time to pass the torch.
“Mike brings the winning combination of deep customer relationships, strategic thinking, flawless execution, and openness to new ideas that will serve Vestmark well as he leads the business through this planned transition and into the future. next chapter in our growth, ”Lunny said in a statement. .
In the meantime, Mark Peabody, senior vice president of product management, will take on some of Blundin’s engineering responsibilities, but if the company finds a great CTO candidate, they’ll consider him.
The transition comes at an inflection point for Vestmark, Blundin said. On the one hand, he said the company hopes to go public, although he declined to provide a timeline for doing so (it is currently a private company).
“We would very much like to do an IPO and access public market capital so that we can grow our business faster, and we have ambitions for that,” Blundin said in an exclusive interview with WealthManagement.com. “From a market conditions perspective, it’s never been so good, and it probably won’t last. There is therefore a certain urgency.
The next chapter will also involve Vestmark investing more in its direct indexing capabilities.
“We are really stepping up the pace now and doubling the investments we need to make sure we can have one of the most compelling DI (direct indexing) solutions on the market,” said Blundin. “In six to 12 months, Vestmark will be deeply involved in direct indexing and the growth and wave that this represents.”
Although the company currently has direct indexing capability, this is a narrow offering, he said. With separately managed accounts and unified managed accounts, customer preferences can be incorporated as restrictions.
“Companies have supported these kinds of investor-imposed restrictions for years and years, and Vestmark has an extremely robust capacity to enforce them,” said Blundin.
Over 10% of Vestmark’s corporate clients currently use its direct indexing technology. But the company expects that figure to double in the next two to three quarters.
“What is happening now with DI is the robust integration of ESG preferences and other types of preferences as well,” said Blundin. “This means integrating new types of data into VestmarkOne and expanding the types of personalization and support. These elements need to be integrated in such a way that they can be viewed and understood simply so that people actually recognize that they are getting the results they were hoping to achieve.
The company is investing heavily to make this technology easy to use, he said.
While not new, investing in fractional shares is another area of interest for Vestmark, one that is increasingly gaining the attention of financial services disruptors. Right now, if an investor wants to buy an index with 1000 stocks, the platform can support it by using models with a smaller number of stocks, a kind of optimized version of the index, which offers the same type of performance and risk tracking error as the index.
“We are looking over the long term for a more robust solution that is able to give a retail investor – someone with $ 100,000 or less to invest – exposure to all stocks in an index if that’s what it is. ‘he wants. Blundin said. “And in order to do that, we have to be able to support fractional shares.”
The platform already supports fractions through its existing accounting and performance components.
“For us, the split support at the heart of our platform is not a daunting issue. It’s sort of a gradual thing that we have to do. The much more interesting problem is the dynamics with third parties.
In other words, custodial data streams don’t know what to do with fractional stock positions, so there are a lot of communication issues that need to be addressed, he said. Vestmark has large clients working there at the moment.
Although Vestmark has RIA clients, it has traditionally grown through its b / d and large corporate clients. But Blundin believes offering direct indexing will help them get more into the AIR market.
“Vestmark is known in this segment, but not as much as we would like, and we believe the direct index product will be a great way for us to market ourselves to this audience,” he said.
There has been a tidal wave of operations in the direct indexing arena in recent years, in which some of the biggest players in asset management and financial services have made great inroads, including Essentially betting that the technology to create customizable portfolios for individual clients without, theoretically, abandoning the rule-based characteristics or risk profile of an index is an option that will resonate with investors.
“If you look in the press at what’s going on – the acquisitions of Just Invest, Open Invest, Aperio – it’s very clear that our industry is preparing to put effort into this area; it equates to a kind of rising tide, ”Blundin said. “We want to make sure that we have a very compelling offer as this tide rises, so that we can take a disproportionate share.”
Vestmark recently celebrated its 20e birthday. It claims $ 1.4 trillion in platform assets, 5.4 million investor accounts and over $ 350 billion in advisor assets as a portfolio manager.
The company is perhaps best known for its VestmarkONE platform, an all-in-one wealth management software solution used by brokers / traders, RIAs and asset managers. The platform was recently awarded at the 2021 Wealth Management Industry Awards.