Parametric's Philosophy

How often does boring equal brilliant? Can simple and straightforward equal success?

Parametric believes that implementation matters a great deal. Unchecked investment costs and volatility can erode growth. Portfolio construction and trading efficiency can make or break long-term investment success. Managing and understanding various kinds of risk is basic to all of our investment processes.

We base this investment philosophy on some long-term observations:

  • Most capital markets are highly efficient. Outperforming them is difficult and often leads to increased risk and costs. Many investors rationally seek these higher returns, but caution is essential.
  • Risk control and diversification can help avoid painful surprises and ensure that an investment program is maintained during difficult periods.
  • Costs matter. They matter so much that they can mean the difference between success and failure. In particular, if the portfolio pays taxes, tax efficiency is paramount.
  • Prudent use of futures, swaps and options can help enhance returns and manage risk.

Our observations and experience lead us to an investment approach we call engineered portfolio solutions. Parametric portfolio managers act as investment "engineers," creating portfolios with explicit risk and return targets and continually measuring and managing the impact of relevant costs. Our approaches are, at their roots, quantitative and rules-based. They evolve slowly as they don’t require repeated tactical insights into valuations or market direction.