U.S. Defensive Equity
The Defensive Equity (DE) strategy seeks to achieve attractive risk-adjusted returns relative to the S&P 500® Index across all market environments. The strategy follows a different path to low volatility equity - one that structurally reduces equity market risk, while adding a relatively uncorrelated risk premium to enhance returns. It is expected that this tradeoff over the long term will lead to a smoother ride along the way and more predictable outcomes.
DE portfolios are constructed and managed to capitalize on the financial "volatility risk premium" that has historically been embedded in index option prices. DE creates implicit downside protection through a core asset allocation that is split between equity and U.S. Treasury Bills. Equity index call and put options are then sold against these core positions. All short option positions are fully-covered in order to eliminate any potential leverage. Clients utilize DE within their asset allocations in several ways including: to complement higher risk equity strategies, as a replacement for traditional equity hedges, to provide an additional component within the marketable alternatives bucket, and as a potential “alpha source” that can be transported to other assets when managed on an “options only overlay” basis.
Investment advisory services offered through Parametric Portfolio Associates® LLC ("Parametric"), an SEC registered investment adviser. The information on this website is for U.S. residents only and does not constitute an offer to sell, or a solicitation of an offer to purchase, securities in any jurisdiction to any person to whom it is not lawful to make such an offer. Investing entails risks and there can be no assurance that Parametric (and its affiliates) will achieve profits or avoid incurring losses. All investments are subject to potential loss of principal. Parametric does not provide tax or legal advice. Prospective investors should consult with a tax or legal advisor before making any investment decision. Please refer to the disclosure page for important information about investments and risks.
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