Custom Indexing

A model of Asset Management where investors own individual securities directly — rather than through a fund — and their portfolio is rebalanced according to a personalized ruleset that accounts for their specific tax situation, income needs, risk preferences, and values. The “index” becomes a framework for construction rather than a product to buy.

Patrick O’Shaughnessy and OSAM Research articulated the case for custom indexing in 2020 when they opened their Canvas platform to the 500th account: “I am more confident than ever that if you squint and look out 5 years, EVERYONE will manage their index strategies this way.” 70% of those 500 accounts were totally unique in their settings — the customization demand was real.

The analogy Patrick uses: just as commission costs for trading marched toward zero over decades, indexing is marching toward custom indexing. It follows the same “directional arrows of progress” logic (a phrase from Josh Wolfe) that governs many structural market shifts — not a question of if, but of when and who builds the infrastructure.

The go-slow-to-go-fast approach O’Shaughnessy describes — partnering with just 9 RIA firms initially, then pausing new customers — is itself a lesson in building network-sensitive platforms: build to the needs of a small committed set before scaling.

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