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Rebalancing Overlay

Parametric’s Rebalancing Overlay solution allows investors to rebalance portfolio exposure quickly and cost-effectively, particularly in times of high volatility.

Overlay Rebalancing Intro Icon


Portfolio drift results in exposures that differ from an investor’s target asset allocation, often leading to increased tracking error. Parametric's Rebalancing Overlay brings portfolios back in line with the policy in a disciplined framework that removes uncertainty and behavioral implications that can lead to inaction or the wrong action.


Investing in an overlay program involves risk. All investments are subject to loss. Learn more.

Derivatives such as futures, swaps, and other investment strategies have certain disadvantages and risks. Futures require the posting of initial and variation margin; therefore, a portion of risk capital must be preserved for this purpose rather than being allocated to a manager. Liquid futures may not exist for published benchmarks, which may result in tracking error. Also, some intraperiod mispricing may occur. Swaps require periodic payments, may be less liquid than futures, and may have counterparty or credit risk.  Some investment strategies require a cash investment equal to the desired amount of exposure.

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Why choose Parametric?

firm aum icon


$121B

Overlay
AUM



Dedicated Investment Professionals icon


43

Dedicated investment
professionals



Experience Managing Overlay icon


30+

Years of overlay
experience 



As of 9/30/2022

How it works


We start by determining the appropriate overlay instruments that enable us to track underlying portfolio exposures. We then select the rebalancing methodology that best incorporates stated risk and the investor’s tracking-error tolerances.


We apply a systematic approach to rebalancing through a three-step process:

number 1


Monitor

We monitor daily portfolio values with an emphasis on total exposure by asset class and deviations relative to predetermined thresholds. 

number 2


Adjust

If these thresholds are breached, we adjust overlay positions to rebalance back to policy targets. 

number 3


Evaluate

We continually evaluate potential overlay program modifications and assess whether the overlay instruments we’re using are still suitable.

Intended benefits of Rebalancing Overlay

Avoid Market Timing icon

Avoiding market timing

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Our disciplined, rules-based Rebalancing Overlay program relies on predetermined thresholds for rebalancing, not market timing or behavioral biases. 

Cost-effective implentation icon

Cost-effective implementation

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Timely and efficient reallocation of portfolio exposure helps reduce tracking error and transaction costs. 

Reducing Exposure Gaps icon

Reducing exposure gaps

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Rebalancing minimizes exposure gaps, bringing portfolios back in line with investment objectives. 

Favorable Returns icon

Favorable risk-adjusted returns

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Rebalancing allows investors to sell positions as their prices increase while purchasing positions experiencing price declines. 

Get in touch

Want to know more about our Rebalancing Overlay solutions? Complete our contact form, and a representative will respond shortly.

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