Tom Lee

Parametric Portfolio Associates LLC (Parametric), a majority owned subsidiary of Eaton Vance Corp., has announced the addition of a new Liquid Alternative strategy to their suite of Volatility Risk Premium (VRP) strategies.

The Parametric Liquid Alternative strategy is designed to provide investors with a diversifying risk premium that targets risk-adjusted returns similar to many hedge funds.  The strategy employs a mix of fully collateralized S&P 500® Index options, creating an effective beta targeted by many hedge funds, but without the complicated structure, leverage, illiquidity or high fees typically associated with them.

The Parametric VRP strategies include a spectrum ranging from covered calls to cash-secured put selling, and includes hybrid strategies which vary the underlying portfolio as well as the mix of options. All of these strategies are designed to target a clients’ specific risk/return objectives.

Tom Lee, Managing Director – Investment Strategy and Research, Parametric Minneapolis Investment Center states, “We are launching the Liquid Alternative strategy to meet a growing demand for strategies that seek to reduce volatility through the introduction of a diversifying risk premium.  Additionally, our clients have asked us to deliver a liquid, low cost solution for core hedge fund allocations.”

“Parametric has over 20 years of experience managing volatility risk premium strategies, with assets under management more than doubling over the last three years; growing from $4.5 billion at the end of 2012 to nearly $10 billion as of 31 December, 2015.” Mr. Lee adds, “Our research and experience have shown that employing a disciplined, long-term approach can successfully generate incremental returns over time, and can be more effective than other, more tactical strategies.

Designed to consistently access the persistent VRP associated with selling equity index options, these strategies are implemented using systematic, rules-based methods. A disciplined, systematic approach also has the benefit of removing the challenge of emotions commonly associated with actively managed strategies.”

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