Rebalancing Overlay
Parametric’s Rebalancing Overlay solution allows investors to rebalance portfolio exposure quickly and cost-effectively, particularly in times of high volatility.
Portfolio drift results in exposures that differ from an investor’s target asset allocation, often leading to increased tracking error. Parametric's Rebalancing Overlay brings portfolios back in line with the policy in a disciplined framework that removes uncertainty and behavioral implications that can lead to inaction or the wrong action.
Investing in an overlay program involves risk. All investments are subject to loss. Learn more.
Explore our suite of overlay solutions
Why choose Parametric?
How it works
We start by determining the appropriate overlay instruments that enable us to track underlying portfolio exposures. We then select the rebalancing methodology that best incorporates stated risk and the investor’s tracking-error tolerances.
We apply a systematic approach to rebalancing through a three-step process:
Monitor
We monitor daily portfolio values with an emphasis on total exposure by asset class and deviations relative to predetermined thresholds.
Adjust
If these thresholds are breached, we adjust overlay positions to rebalance back to policy targets.
Evaluate
We continually evaluate potential overlay program modifications and assess whether the overlay instruments we’re using are still suitable.
Intended benefits of Rebalancing Overlay
Avoiding market timing
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Our disciplined, rules-based Rebalancing Overlay program relies on predetermined thresholds for rebalancing, not market timing or behavioral biases.
Cost-effective implementation
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Timely and efficient reallocation of portfolio exposure helps reduce tracking error and transaction costs.
Reducing exposure gaps
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Rebalancing minimizes exposure gaps, bringing portfolios back in line with investment objectives.
Favorable risk-adjusted returns
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Rebalancing allows investors to sell positions as their prices increase while purchasing positions experiencing price declines.
More to explore
Extensive Capabilities of an Overlay Program: More than Meets the Eye
by Richard Fong, Managing Director, Investment Strategy; Heather Wolf, Portfolio Manager
August 5, 2024
Read why we believe consultation, customization and flexibility are three key elements of a successful and holistic overlay program.
Reducing Leverage When Cash Rates Are Elevated Is (Probably) Market Timing
by Benjamin Hood, Managing Director of Research
February 26, 2024
Should investors use leverage in their portfolios when interest rates on borrowing have risen? Read why we think it can still make sense.
2024 Institutional Outlook: Working with Investors to Help Enhance Portfolio Value
by Chris Uhas, Managing Director, Head of Institutional Distribution
January 29, 2024
What matters most to institutional investors in 2024? Here’s what we think.