Parametric Dividend Income: Alternative Attribution Methodology
The Parametric Dividend Income
strategy generates its performance through portfolio construction techniques, and not by any reliance on forward-looking, relative value judgments on the underlying securities. There are three main drivers to the strategy’s performance. First, the strategy filters the entire universe of U.S. equities down to an eligible universe of dividend payers. Second, the strategy reweights payers, identified by balancing a yield objective against historical risk measures, to construct a broadly diversified portfolio via a system of relatively static target weights capturing equally weighted economic sectors and equally weighted securities within each sector. Third, it uses a disciplined process to rebalance back to these target weights, both to maintain the diversification of the portfolio and to harvest a potential “rebalancing alpha” by systematically buying low/selling high. In this way, the Parametric Dividend Income
strategy’s outperformance can be said to rely on three major factors: filtering, reweighting, and rebalancing decisions.