Derivative Overlays

We design, model and manage customized overlay solutions that can shape a client’s portfolio risk profile and improve the risk/return profile of their investments.

We help clients optimize portfolio beta and eliminate uncompensated or unwanted risk across a broad range of risk types – from currency, to credit, to interest rates, to equity – and manage more than $60 billion in derivative notional value in overlay portfolios.

Our solutions are built upon an experienced derivative trading platform and quantitative research expertise. Our in-house derivative operations are an end-to-end solution, with dedicated front, middle and back offices that provide:

  • strong market relationships and long standing portfolio manager expertise
  • a sophisticated understanding of derivatives combined with in-depth quantitative research
  • a highly scalable straight-through-processing infrastructure
  • an experienced legal team for negotiating derivative agreements
  • counterparty credit and liquidity risk management expertise
  • valuation, settlements and collateral management services.

Benefits

  • Increased precision in risk management: Overlay strategies can provide additional precision in reducing different portfolio risks – with minimal impact to a portfolio’s underlying asset allocation
  • Yield enhancement: Overlay strategies can boost returns without incurring additional portfolio risk.
  • Lower transaction costs: Transaction costs using physical securities can be substantial. Derivatives can provide a more efficient portfolio rebalancing tool.
  • Hedging – without impact on return-seeking portfolio: Overlays let an investor increase interest rate hedging, with little impact to the plan’s return-seeking asset allocation.
  • Tail risk management: Overlays can reshape the risk profile by adding downside portfolio protection.