Description of Aperio
Aperio is a California limited liability company and an investment adviser registered
with and regulated by the SEC under the Investment Advisers Act of 1940 (the
“Advisers Act”). Aperio manages domestic, international, and global equity portfolios
for individuals, high-net-worth individuals, institutions, and intermediaries such as
wealth managers, consultants, and family offices. Aperio also advises a limited
number of ERISA clients and provides sub-advisory investment management services
to registered mutual funds and pooled investment vehicles, including private funds.
Aperio was founded and has been in business since August 1999 and until early 2016,
was entirely owned by its four partners: Patrick Geddes, Guy Lampard, Robert
Newman, and Paul Solli.
Principal Owners
On February 1, 2021, BlackRock, Inc. (“BlackRock”), a publicly traded company,
completed its acquisition of Aperio Holdings, LLC, and other equity interests related
to Aperio Holdings, LLC, upon which BlackRock acquired all of the outstanding equity
interests of Aperio Holdings previously held by Aperio insiders and Aperio’s majority
investor, Golden Gate Capital, and thus acquired, indirectly, all equity interests in
Aperio (the “Acquisition”).
As a result of the Acquisition, Aperio is an indirect wholly-owned subsidiary of
BlackRock, a global leader in investment management, risk management, and
advisory services for institutional and retail clients.
As used in this Brochure, the term the “Adviser” refers to Aperio, except where the
context otherwise requires. References to “BlackRock” in this Brochure include
BlackRock, Inc., together with its subsidiaries, including investment advisory and trust
company subsidiaries (“BlackRock Investment Advisers” or the “Advisers,” which
includes Aperio).
Advisory Services
Separate Account Management
Aperio offers three (3) main equity investment strategies:
Active Tax Management,
Factor Tilts, and
Values-aligned investing.
Aperio’s investment management services are offered (directly or indirectly through a
sub-advisory arrangement with the client’s primary investment adviser) to U.S.
registered investment companies, single-investor funds, discretionary and non-
discretionary advisory programs, commingled investment vehicles, other investment
advisers, and individuals and institutional investors through separate account
management. The types of clients to which each Adviser provides investment
management services are disclosed in each Adviser’s Form ADV Part 1A and
summarized in Item 7 (“Types of Clients”) of this Brochure.
Aperio creates customized separately managed equity portfolios using quantitative
models and tools to incorporate client specifications for benchmark, factor tilts, tax
management, and values-aligned preferences, including, without limitation,
incorporating socially responsible investing considerations (“SRI”) or environmental,
social, and governance (“ESG”) considerations. Clients also are able to customize their
portfolios to meet specific requirements, such as holding restrictions,
industry/country limitations, and situation-appropriate tax needs. While Aperio
generally only implements long-only equity portfolios, certain clients that meet
eligibility criteria established by Aperio may invest in long/short equity strategies.
Benchmarks include broad market equity indexes representing domestic and/or
foreign companies. Once a client has selected an investment strategy and benchmark,
Aperio provides continuous supervision and management of the assets. Clients are
responsible for informing Aperio of any changes to their investment objectives,
individual needs, and/or restrictions.
For clients implementing certain strategies and where internal Aperio systems
support management, Aperio also offers the capability to integrate exchange-traded
funds (“ETFs”) into Aperio’s management of client portfolios at the client’s direction.
For information concerning costs associated with integrating ETFs into an Aperio
account, please refer to Item 5 (“Fees and Compensation”), and for information
regarding a potential conflict of interest concerning Aperio management of ETF
holdings which may cause clients to pay fees to Aperio affiliates for providing
management, administrative or other services (“Affiliated Funds”) that are in addition
to any fees received by Aperio for providing discretionary investment services, please
refer to Item 5 (“Fees and Compensation”), and Item 11 (“Code of Ethics, Participation
or Interest in Client Transactions, and Personal Trading”).
Please refer to Item 8: Methods of Analysis, Investment Strategies, and Risk of Loss for
detailed information regarding Aperio strategies.
Advisory Agreements
Separate Accounts
For all separate account clients, a written advisory agreement governs the terms of
the relationship between Aperio and its clients. Aperio’s most common agreement
types are its Master Sub-Advisory Agreement and individual Investment Advisory
Agreement. Both types of agreements describe the advisory services to be provided,
Aperio’s responsibilities, and the terms of engagement, including, but not limited to,
fees and termination.
Investment advisor intermediaries, consultants, and wealth managers (collectively,
“Intermediaries,” and individually, an “Intermediary”) acting as the primary advisor
may enter into a Master Sub-Advisory Agreement with Aperio, or may enter into a sub-
advisory or similar agreement with another Intermediary that provides access to a
turnkey asset management platform (“TAMP”) and has entered into a Master Sub-
Advisory Agreement with Aperio, when Aperio has been selected to manage portfolios
for such Intermediaries’ clients as a sub-advisor. In this case, the Intermediary’s client
(usually an individual investor, a high-net-worth individual investor or
foundation/endowment) delegates to the Intermediary the authority to select sub-
advisor managers. Otherwise, non-sub-advisory clients, including those that are
introduced to Aperio by an Intermediary, typically enter into an individual Investment
Advisory Agreement.
Both the Master Sub-Advisory Agreement and the individual Investment Advisory
Agreement may be terminated by either party upon written notice to the other party. If
Aperio terminates a Master Sub-Advisory Agreement, Aperio agrees to continue
service for a specified period to facilitate transitioning of accounts. Both agreements
generally provide for management fees paid in advance to be pro-rated to the date of
termination and any unearned portion of the prepaid fees to be refunded to the client.
For services billed in arrears, the client will be billed for services earned but not paid.
Services of Affiliates
BlackRock, Inc., operates its investment management business through the Advisers,
as well as through multiple affiliates, one of which is a limited purpose national
banking association chartered by the U.S. Department of Treasury’s Office of the
Comptroller of the Currency, some of which are registered only with non-U.S.
regulatory authorities and some of which are registered with multiple regulatory
authorities. The Advisers use the services of their broker-dealer affiliates which are
registered under the Securities Exchange Act of 1934, as amended (the “Exchange
Act”) and members of the Financial Industry Regulatory Authority (“FINRA”), as
needed.
For additional information, please refer to Item 10 (“Other Financial Industry
Activities and Affiliations”) and Item 12 (“Brokerage Practices”) of this Brochure.
The Advisers, including Aperio from time to time, use the services of one or more
BlackRock, Inc., subsidiaries or appropriate personnel of one or more BlackRock, Inc.,
subsidiaries for investment advice, portfolio execution and trading, operational
support, and client servicing in their local or regional markets or their areas of special
expertise without specific consent by the client, if permitted and except to the extent
explicitly restricted by the client in or pursuant to its agreement with Aperio, or
inconsistent with applicable law. Arrangements among affiliates take a variety of
forms, including but not limited to dual employee, delegation, participating affiliate,
sub-advisory, sub-agency, or other servicing agreements. This practice is designed to
make BlackRock’s global capabilities available to an Adviser’s clients in as seamless a
manner as practical within a varying global regulatory framework. In these
circumstances, the Adviser with which the client has its agreement remains fully
responsible for the account from a legal and contractual perspective. No additional
fees are charged for the affiliates’ services except as set forth in the client’s
agreement, governing documents and/or offering memorandum (“OM”).
Wrap Program Services
Aperio’s separate account strategies are also offered through certain wrap programs
(each, a “Wrap Program”), which are sponsored by unaffiliated multi-service financial
institutions (each, a “Wrap Sponsor”). A list of Wrap Programs may be found in Part 1
of our Form ADV. For further information on Wrap Programs, please also refer below to
information in Item 5.
Aperio requires a minimum account size for certain of its investment strategies, which
varies among Wrap Programs. In most Wrap Programs, the Wrap Sponsor is
responsible for establishing the financial circumstances, investment objectives, and
investment restrictions applicable to each client, often through a client profile and
discussions between the client and the Wrap Sponsor’s personnel.
For single-contract Wrap Programs, Aperio contracts directly with the Wrap Sponsor
or an affiliated advisor, or with an Intermediary that provides the Wrap Sponsor with
access to a TAMP, and the written agreement governing Aperio’s services for the Wrap
Program describes the services to be provided for each Wrap Program client (the
“Wrap Client”), Aperio’s responsibilities, and the terms of engagement, including fees
and termination. For single-contract Wrap Programs, Aperio does not execute a
contract with each Wrap Client.
Conversely, for dual-contract Wrap Programs, Aperio will execute an individual
Investment Advisory Agreement with each Wrap Client. Wrap Sponsors of such dual-
contract Wrap Programs may require service or other additional agreements with
Aperio to cover items such as use of software provided, data downloads of account
information, and electronic trading service terms and conditions.
Generally, a Wrap Client, with the assistance and advice of the Wrap Sponsor, selects
an investment advisor, such as Aperio, from a list of Wrap Sponsor approved advisers
to provide investment management services for their assets allocated to their Wrap
Program account(s). In addition, a Wrap Client may receive certain other services
provided by the Wrap Sponsor and/or entities affiliated with the Wrap Sponsor (such
as manager selection, trading execution, custodial services, periodic monitoring of
investment managers, and performance reporting).
Wrap Clients are typically charged by the Wrap Sponsor quarterly, in advance or in
arrears, a comprehensive or wrap fee based upon a percentage of the value of the
assets under management to cover such services (the “Wrap Fee”). The Wrap Fee
often, but not always, includes the advisory fees charged by Aperio (or other
participating managers) through the Wrap Program. Where the services provided by
Aperio are included in the Wrap Fee, the Wrap Sponsor generally collects the Wrap Fee
from the Wrap Client and remits the advisory fee to Aperio. For dual-contract Wrap
Programs, Aperio’s fee is typically paid directly by the Wrap Client pursuant to the
Investment Advisory Agreement with Aperio.
Although the types of investment management services provided by Aperio to Wrap
Clients are generally the same as the types of investment management services
provided to our non-Wrap Program Clients, certain differences may exist. For example,
as with other Master Sub-Advisory arrangements, the Wrap Sponsor often collects
each client’s investment objectives and assists the client in determining the strategy
best suited for the client, and client communications regarding the investment
management of a Wrap Client’s assets are generally between the Wrap Sponsor or an
affiliated advisor and the Wrap Client, with Aperio communicating only with the Wrap
Sponsor or affiliated advisor, unless requested otherwise.
Since the Wrap Fee paid by Wrap Clients to the Wrap Sponsor is all-inclusive, subject
to enumerated exceptions for additional fees borne by Wrap Clients as determined by
the Wrap Sponsor, Aperio believes it is important for each Wrap Client to evaluate
whether such a program is suitable for their needs and cost effective, given factors
such as the size of the account, frequency of transactions, and the Wrap Client’s
investment objectives, as well as whether comparable or similar services are available
at a lower cost if provided separately. Wrap Sponsors are responsible for providing
Wrap Clients with this Brochure and applicable brochures for the Wrap Program (the
“Wrap Program Brochure”). Wrap Clients should review the Wrap Program Brochure
for further details about the relevant Wrap Program.
Model-Based SMA Program
Pursuant to participation in a “Model-Based SMA Program,” Aperio provides
discretionary investment advisory services to an overlay portfolio manager (“OPM”) in
connection with the OPM’s provision of investment advisory services to clients
through a unified managed account Wrap Program. Specific to the terms of the
Model-Based SMA Program agreement, Aperio acts as investment adviser to each
Model-Based SMA Program client designated by the Wrap Sponsor and exercises
discretion to select securities for the Model-Based SMA Program client’s account
solely by delivering a model portfolio to the OPM, which the OPM will implement
(subject only to account-specific restrictions imposed by such client) and arrange for
execution of trades in such client’s account. Under the terms of the Model-Based SMA
Program, the OPM can choose not to execute the trades recommended by Aperio. In
the Model-Based SMA Program, the fees payable to Aperio for providing model
portfolios are paid by the Wrap Sponsor based on the amount of their clients’ assets
that are managed by the OPM pursuant to a model portfolio provided by Aperio. The
Model-Based SMA Program to which Aperio currently provides model portfolios is
identified in Aperio’s Form ADV Part 1.
Amount of Client Assets Managed
As of December 31, 2023, the following represents the total amount of client assets
under management by Aperio:
Type of Account Assets Under Management (“AUM”)
Discretionary $80,212,688,341
Non-Discretionary $0
Total: $80,212,688,341