Overlay
Parametric’s Overlay solutions form a comprehensive portfolio management solution designed to help investors increase expected return and reduce tracking error relative to a targeted policy allocation.
The scope of an overlay program can be narrow or broad depending on each investor’s objectives and constraints. This framework allows for seamless integration of overlay with investment staff, underlying investment managers, and other stakeholders. Overlay solutions are highly customizable; investors may choose one or more components to alleviate specific portfolio shortfalls and inefficiencies.
Investing in an overlay program involves risk. All investments are subject to loss. Learn more.
Explore more overlay solutions
Overlay solutions
Cash Overlay allows institutions to eliminate performance drag by aligning closely to a plan’s strategic asset allocations while still being able to access cash assets when needed.
Applying Currency Overlay to a portion of a portfolio’s international holdings helps mute currency risk, allowing investors to more directly access asset returns.
Asset class exposures occasionally deviate from policy targets and tactical preferences, potentially resulting in unwanted exposures and increased tracking error. Rebalancing Overlay brings portfolios back to the desired allocations set out in an institution’s investment policy objectives.
Through the use of derivatives, Transition Overlay seeks to help institutions maintain market exposure, lower risk, and increase returns during manager transition or asset-allocation adjustments.
Parametric also offers a wide range of other overlay solutions, including portable alpha, custom synthetic exposures, completion portfolios, liability-driven investing (LDI), and hedging strategies.
Why choose Parametric?
How it works
Customized solutions
We take the time to understand each institution’s objectives and policy challenges, then design a custom overlay solution to address these challenges and establish the appropriate program parameters.
Analytics
We use proprietary technology to validate portfolio data and generate custom analytics. Our overlay team evaluates and confirms these analytics and makes the necessary adjustments after approval and verification from the portfolio management team.
Detailed reporting
We generate comprehensive program reporting published on a secure client portal, providing institutional investors with increased oversight and governance. Comprehensive performance metrics measure returns by asset class and overlay component.
Intended benefits of overlays
Risk mitigation
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Overlay programs provide investors with risk controls, portfolio governance, and access to risk specialists.
Enhanced returns
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Overlay programs can increase expected returns and reduce tracking error and transaction costs.
Comprehensive reporting
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Detailed reporting gives institutional investors insights for oversight and governance.
Increased efficiency
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Overlay offers institutions greater liquidity and flexibility in managing their portfolios.
Overlay strategy overview
Want a deeper dive into Parametric’s Overlay Strategy?
Download our strategy overview.
Get in touch
Want to know more about our Overlay solutions? Complete our contact form, and a representative will respond shortly.
More to explore
What Is Overlay? A Look at Four Common Applications
by Antony Motl, Portfolio Manager
August 14, 2023
Can an overlay program help investors increase expected return and reduce tracking error relative to a targeted policy allocation? In this paper we delve into the most common overlay components to explore how such a framework allows for seamless integration with investment staff, underlying investment managers, and other stakeholders.
2023 Institutional Outlook: Making Preparations for Market Gyrations
by Chris Uhas, Managing Director, Head of Institutional Distribution; Richard Fong, Director, Investment Strategy ; +1
February 16, 2023
Hedging against portfolio risk seemed like a good idea at the time. Why did portfolios underperform anyway? Find out what’s under the hood of the options market.
Cash Securitization: The Challenge of Effective Liquidity Management
by Richard Fong, Director, Investment Strategy
October 20, 2022
Institutional investors don’t typically hold much cash, but they may need the liquidity for a variety of reasons. A cash-securitization overlay program can help.