Parametric Portfolio Associates

Global Low Beta VRP

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.

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.

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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

Portfolio construction

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.

Why choose Parametric?

total firm AUM icon

$366B

Total firm
AUM

VRP Solutions AUM icon

$15B

VRP solutions
AUM

Firm Experience icon

30+

Years of
firm experience

As of 9/30/2022

Strategy overview

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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.

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