Frec’s long short product asks customers to make a difficult decision: choosing a tilt for their investment towards a factor like value, quality, or growth. Many customers freeze at this step because they’ve been educated to “just buy the index”. I was in that camp too, so I understand the hesitation. What I learned is that a modest factor tilt can help balance exposures elsewhere in an investor’s financial life. Consider a couple working in tech and living in the Bay Area. They may own employer stock, a home whose value is tied to the local technology economy, and technology-heavy investments similar to  QQQ. Taken together, they are likely overexposed to tech and the Growth factor. One way to balance that exposure is to direct new investments toward an index with a modest tilt toward an underrepresented factor, such as Value or Quality. The long and short extensions can reinforce that positioning by slightly reducing exposure to stocks with the strongest Growth characteristics. The customer still owns a portfolio designed to track the same underlying index. Both extensions operate within a defined tracking error, or risk budget, and the portfolio maintains a theoretical beta of ~1. There is also an important side benefit: more powerful tax loss harvesting. Because the strategy holds both long and short positions, it can create opportunities to harvest losses whether the market is rising or falling. For example, a 250/150 Long short direct index targets approximately 4% of annualized tracking error. In statistical terms, roughly two-thirds of one-year outcomes would be expected to fall within 4% above or below the benchmark. The strategy is also estimated to harvest capital losses of ~55% of the initial investment during the first year. We’re excited to continue to bring sophisticated products directly in the hands of self-managed investors.