Low Beta VRP

Our Low Beta VRP strategy seeks to capture VRP using a transparent and rules-based investment process without the use of leverage. It offers a beta target of 0.3, comparable to many hedge funds.

Strategy Goals

The Low Beta VRP strategy is designed to target a distinct and diversifying risk premium. The strategy follows a transparent, rules-based investment process that targets an equity beta comparable to hedge funds, without the use of leverage. It employs a mix of fully collateralized S&P 500^® Index options to seek increased returns without increased risk.

Low Beta VRP can be used as a standalone allocation or in a core-satellite framework with a portfolio of hedge funds, potentially reducing the overall fees associated with a typical alternatives portfolio without compromising risk-adjusted returns. The strategy’s objective is absolute return.

The volatility risk premium represents the amount paid by option buyers in exchange for the insurance-like protection that options can provide. Option sellers receive this premium amount embedded in option prices, as the premium for providing liquidity to option buyers.

Low Beta VRP is one of Parametric's VRP strategies which include a spectrum ranging from covered calls to cash-secured put selling, and include hybrid strategies which vary the underlying portfolio as well as the mix of options. All of these strategies are designed to target a client’s specific risk/return objectives.

Shift From Traditional to Core - Satellite Framework

Hedge funds are being disaggregated into alternative beta and alpha¹
Investors can access alternative betas in a low cost, efficient manner
Disintermediation by providers of alternative beta is causing investors to re-think their allocations to alternatives from the traditional to a core-satellite approach

Low Beta VRP graphic

For illustrative purposes only

¹Ge (2015), “Liquid Alternative as a Viable Investment Choice” The Journal of Index Investing

For informational purposes only

Liquid Alternative is offered by Parametric Investment & Overlay Strategies. For additional information please visit the Disclosure page.

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Investment advisory services offered through Parametric Portfolio Associates^® LLC ("Parametric"), an investment advisor registered with the US Securities and Exchange Commission.

Parametric (National Registration Database No. 42850) is also registered as a Portfolio Manager with the securities regulatory authorities in certain provinces of Canada with regard to specific products and strategies. Parametric provides advisory services directly to institutional investors and indirectly to individual investors through financial intermediaries. The information on this website does not constitute an offer to sell, or a solicitation of an offer to purchase, securities in any jurisdiction to any person to whom it is not lawful to make such an offer. Investing entails risks and there can be no assurance that Parametric (and its affiliates) will achieve profits or avoid incurring losses. All investments are subject to potential loss of principal. Parametric does not provide tax or legal advice. Prospective investors should consult with a tax or legal advisor before making any investment decision. Please refer to the Disclosure page for important information about investments and risks.

S&P Dow Jones Indices are a product of S&P Dow Jones Indices LLC (“S&P DJI”) and have been licensed for use. S&P^® indexes are registered trademarks of S&P DJI; Dow Jones^® is a registered trademark of Dow Jones Trademark Holdings LLC (“Dow Jones”); S&P DJI, Dow Jones, and their respective affiliates do not sponsor, endorse, sell, or promote Parametric and its strategies, will not have any liability with respect thereto, and do not have any liability for any errors, omissions, or interruptions of the S&P Dow Jones Indices.

Low Beta VRP

Strategy Goals

Shift From Traditional to Core - Satellite Framework

Connect with our team on this strategy

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