Parametric’s Global Low Beta Volatility Risk Premium (VRP) strategy seeks consistent incremental returns by selling fully collateralized equity index options against a conservatively structured base of US Treasuries and global equity.
This strategy is suited to investors seeking an alternative to hedge funds; it is designed to deliver more predictable returns, better liquidity, greater transparency, and lower fees.
Investing in an options strategy involves risk. All investments are subject to loss. Learn more.
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A strategy that
adapts to the market
Global Low Beta VRP employs a rules-based, systematic approach that avoids forecasts and market timing but remains responsive to changing market conditions through the use of dynamic strike prices. Implied volatility drives the determination of strike price, and strike prices move further out of the money in higher-volatility environments. Frequent expirations mitigate risk and allow for the capture of mean reversion in volatility.
Due to economic, behavioral, and structural factors, options buyers are willing to pay a premium to sellers to hedge against the risk of drawdowns and volatility. Global Low Beta VRP capitalizes on this tendency for index options to trade at higher implied volatilities than realized volatility.
Portfolio construction
Model beta: 0.3
Intended benefits of Global Low Beta VRP

Absolute returns
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Global Low Beta VRP aims to produce total returns above those of US Treasury bills.

Consistency
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Investors gain access to the volatility risk premium, offering the potential for long-term diversification benefits compared to traditional risk premiums.

Systematic
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A stringent rules-based process eliminates behavioral biases and market timing.

Hedge fund alternative
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Global Low Beta VRP is designed to deliver better liquidity, greater transparency, and lower fees than hedge funds.

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