Using Options to Hedge Equity Portfolios banner
Whitepaper

Concentrated Equity Risk Management: Hedging Recent IPO Exposure

February 9, 2022
There are times when institutional investors find themselves with a concentrated exposure to single-name equities. The source of this concentration is often an allocation to venture capital (VC) and private equity (PE). The frequency of this “problem of the riches” has grown in recent years due to the following factors:

  • Institutional investors have increased their allocations to PE and VC.
  • Similar to public-equity markets, PE and VC have exhibited robust
    performance in recent years, with many portfolio companies evolving
    into publicly listed stocks.
  • Managers have been extending their holding period of fund investments
    relative to historical averages. This includes holding investments in the fund
    well past the restricted date post-IPO, when positions were typically
    distributed to the end investor.

  • Thanks to these factors, investors have found themselves with outsized exposure to a highly appreciated, concentrated equity position. The positions are often large enough to create a significant amount of idiosyncratic risk in the broader fund. Investors must evaluate a series of trade-offs and considerations to determine which risk-management solution may be the most appropriate for their circumstances.

Download this paper

Clint Talmo photo

Clint Talmo, CFA

Director, Investment Strategy

More about this author

More to explore

This Material Is Intended for
Institutional Investors Only


By clicking Agree, you acknowledge that you have read the terms detailed below. You also confirm that you are a qualified institutional investor or a consultant to qualified institutional investors and wish to proceed. Parametric does not provide legal, accounting, or tax advice or consulting service.



The information on this area of the Parametric Portfolio Associates® LLC (“Parametric”) website is intended for qualified institutional investors and their consultants. This information is not intended for accredited investors in any jurisdiction outside the United States in which the distribution or sale of Parametric investment services is not authorized.

It is published for informational purposes only and does not purport to address the financial objectives, situation, or specific needs of any investor. If you do not qualify, the information shown on this site (which may include information about our investment strategies and products, market commentary, and composite performance) may not be relevant or appropriate for you. Certain solutions discussed in these materials will be subject to minimum investment amounts and other restrictions that apply. There can be no assurance that any investment product or strategy will achieve its investment objectives or that there will be any return of capital. Performance may be volatile, and investors could lose all or a substantial portion of their investment.



I acknowledge that I am a qualified investor and that I have read, understand, and agree to the above conditions.