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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.

Explore our suite of overlay solutions

Why choose Parametric?


Overlay AUM


Years of overlay experience


Dedicated investment professionals

As of 3/31/2024

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


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

number 2


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

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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. 

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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. 

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Favorable risk-adjusted returns

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

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Liability-driven investing, Volatility, Overlay, Fixed income, Commodity, Options, Institutional investor, +4