Banner
Global Defensive Equity

Parametric’s Global Defensive Equity (GDE) seeks to provide equity-like returns with reduced volatility over a full market cycle. Investors access exposure to the volatility risk premium (VRP) through collateralized put underwriting and covered call overwriting.

Dynamic Put Selling Intro IconGlobal Defensive Equity header icon


For institutions particularly sensitive to volatility, reducing equity market risk in favor of pursuing the VRP smooths out returns over the long term, providing an alternative to hedge-fund strategies at a lower cost and with greater liquidity and transparency.


Investing in an options strategy involves risk. All investments are subject to loss. Learn more.

The effectiveness of the option strategy depends on a general imbalance of natural buyers over natural sellers of index options. This imbalance could decrease or be eliminated, which could have an adverse effect. A decision as to whether, when, and how to use options involves the exercise of skill and judgment, and even a well-conceived and -executed options programs may be adversely affected by market behavior or unexpected events. Successful options strategies may require the anticipation of future movements in securities prices, interest rates, and other economic factors. No assurances can be given that the judgment of Parametric in this respect will be correct. 

Options are not suitable for all investors and carry additional risks. Investors must ensure that they have read and understood the current options risk disclosure document before entering into any options transactions. In addition, investors should consult with a tax, legal, or financial advisor prior to contemplating any derivative transactions. The options risk disclosure document can be accessed here: http://www.optionsclearing.com/about/publications/character-risks.jsp.

 

Explore more VRP solutions

A smoother ride


GDE’s model-driven approach is designed to remove emotions and guesswork from the investment decision-making process.


We construct a lower-volatility portfolio by reducing equity market beta and systematically selling fully collateralized equity index options to enhance returns. Compared with a fully invested equity portfolio, GDE’s combination of reduced equity exposure and the VRP is expected to realize a lower magnitude in drawdowns and a quicker recovery from stress events. The strategy is expected to deliver the best relative performance in moderately down and sideways markets while trailing in strong rallies. GDE is best suited for investors with a heightened sensitivity to equity risk seeking an alternative source of yield.

Portfolio construction

Model beta: 0.5

 

GRAPHIC

How Global Defensive Equity works

We begin with a 50% allocation to the MSCI ACWI and a 50% Treasury bill allocation.
Next we sell put and call options against the base portfolio to capture the VRP and enhance returns.

Options characteristics:

  • Fully collateralized or covered (no leverage)
  • Exchange-traded and cash-settled
  • Out of the money at initiation
  • One-month or less initial tenor
  • Options on S&P 500®, MSCI EAFE, and MSCI Emerging Markets

Our rules-based approach aims to deliver more predictable outcomes, using disciplined rebalancing with no market timing.

Rules-based implementation:

  • Disciplined rebalancing back to 50-50 blend based on predetermined bands
  • Laddered options portfolio with options sales occurring multiple times per week

Intended benefits of Global Defensive Equity

Systematic process icon

Systematic process

Learn more >>

GDE offers a disciplined and rulesbased investment process designed to deliver more predictable, repeatable results without the use of market forecasts or behavioral biases.

Faster recovery

Learn more >>

The defensively structured base portfolio is designed to reduce drawdowns during stress events. Consistent exposure to the VRP aims to deliver faster recovery to prior peak valuation compared with a long-only equity portfolio.

Portfolio diversification icon

Portfolio diversification

Learn more >>

GDE gives investors an alternative return source while potentially delivering favorable risk-adjusted returns without sacrificing liquidity. It may be used as a complement or replacement for hedge funds or low-volatility equity allocations.

Why choose Parametric?

total firm AUM icon



$415B

Total firm
AUM



VRP Solutions AUM icon


$19.1B

VRP solutions
AUM



Firm Experience icon


30+

Years of
firm experience



As of 3/31/2022

Volatility Risk Premium

MORE WAYS TO INVEST

Volatility Risk Premium

Parametric's volatility risk premium solutions are strategies that seek to benefit from the VRP, a distinct and diversifying risk premium that options buyers pay to options sellers. We’ve historically observed that this premium can be a persistent source of return, better positioning your clients’ portfolios to weather market volatility over a full market cycle and improve overall performance.

Get in touch

Want to know more about our Global Defensive Equity solutions? Complete our contact form, and a representative will respond shortly.

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.