Parametric Debuts New Liquid Alternative Strategy

Feb 9 2016 | 7:52pm ET

Eaton Vance’s Parametric Portfolio Associates has added a new liquid alternative strategy to its suite of volatility risk premium 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, according to a company statement. The strategy employs a mix of fully collateralized S&P 500 options, creating an effective beta targeted by many hedge funds but without the complicated structure, leverage, illiquidity or high fees typically associated with them.  

"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,” stated Tom Lee, managing director of investment strategy and research in Parametric’s Minneapolis investment center, in the statement.  “Additionally, our clients have asked us to deliver a liquid, low cost solution for core hedge fund allocations."

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

Mutual-fund behemoth Eaton Vance bought 80% of Parametric in 2003. The Seattle-based company focuses on engineered portfolio solutions, including rules-based alpha-seeking equity, and alternative strategies, as well as implementation services including custom core equity, futures overlay and centralized portfolio management.

Parametric managed approximately $152.3 billion in total assets on behalf of institutions, high-net-worth individuals and fund investors in the U.S. and abroad as of December 31, 2015. 

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