Download parametric custom coretm us large cap

Q2 / 2017
PARAMETRIC CUSTOM CORE ‌
U.S. LARGE CAP
TM
BENCHMARK: S&P 500®
The Strategy
Parametric’s Custom CoreTM U.S. Large Cap
portfolios with tax management are designed
to provide a client with exposure to U.S.
large cap equity securities while maximizing
after-tax returns through a variety of tax
management techniques. The strategy seeks
to exceed its benchmark on an after-tax
basis.
The Approach
Portfolios are constructed by purchasing
a diversified basket of securities. Tax
management techniques including tax loss
harvesting and the management of capital
gains are used to minimize the impact of
taxes, and maximize after-tax return.
The Features
Custom CoreTM portfolios can be
benchmarked to a variety of indexes.
Benchmark options vary by program. In
addition, portfolios can be tailored to meet
client objectives. Clients can choose to
apply an industry or social screen. Portfolios
can also be funded in kind and transitioned
tax-efficiently.
Growth of a Dollar (as of 6/30/2017)
$2.10
$1.90
$1.70
$1.50
$1.30
$1.10
$0.90
$0.70
$0.50
2008
2009
2010
2011
PT Port
2012
2013
PT Bench
2014
2015
2016
2017
Performance is presented for a representative account. It
was selected based on objective criteria and not
performance. It is the oldest account invested in the
strategy which incepted in cash, has no investment
restrictions and has not changed its benchmark. Individual
client account performance will vary. Portfolio pre-tax and
after-tax returns are net of advisory fees and transaction
costs since account’s inception. Benchmark pre-tax and
after-tax returns do not reflect the deduction of advisory
fees or transaction costs. It is not possible to invest directly
in an index; they are unmanaged and do not reflect the
deduction of fees and expenses. Past performance is not
indicative future returns. All investments are subject to loss.
See reverse for additional important information and
disclosure.
AT Bench (Simulated)
AT Port
% Average Annual Total Composite Returns (as of 6/30/2017)
Q2
YTD
1 Year
3 Years
5 Years
10 Years
15 Years
20 Years
Parametric (Net of Fees) %
S&P 500®
3.1
3.1
9.1
9.3
17.6
17.9
9.2
9.6
14.1
14.6
6.8
7.2
Excess Return
0.0
-0.2
-0.2
-0.4
-0.5
-0.3
7.9
8.3
-0.4
6.8
7.2
-0.4
% Calendar Year Composite Returns
2006
Pre-Tax %
Parametric (Net of Fees)
S&P 500®
Difference
After-Tax %
Parametric (Net of Fees)
S&P 500® (Simulated)
Difference
Tax Alpha1
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
15.3
15.8
-0.5
5.5
5.5
0.0
-36.2
-37.0
0.8
24.8
26.5
-1.7
14.5
15.1
-0.5
1.8
2.1
-0.3
15.4
16.0
-0.6
31.9
32.4
-0.5
12.9
13.7
-0.7
1.1
1.4
-0.3
11.6
12.0
-0.4
15.1
15.0
0.1
0.1
5.9
4.8
1.2
0.7
-28.7
-36.1
7.4
6.4
29.3
27.6
1.7
2.8
14.2
14.8
-0.6
-0.6
2.3
1.7
0.6
0.5
14.6
15.3
-0.7
-0.6
30.9
31.0
-0.2
-0.3
12.0
12.0
0.0
0.2
2.1
0.5
1.5
1.4
12.3
11.0
1.3
1.2
Tax-Managed Custom CoreTM strategies are offered by Parametric Custom Tax-Managed & Centralized Portfolio Management.
Non Tax-Managed Custom CoreTM strategies are offered by Parametric Investment & Overlay Strategies.*
*Parametric is divided into two segments: Parametric Investment & Overlay Strategies and Parametric Custom Tax-Managed & Centralized Portfolio Management. For compliance with the
Global Investment Performance Standards (GIPS® ), the Firm is defined and held out to the public as Parametric Investment & Overlay Strategies.
1
Tax Alpha is hypothetical and is defined as the simulated, net after-tax excess return minus any gross pre-tax excess return:
Source: Parametric, Bloomberg & FactSet as of 6/30/2017. For illustrative purposes only; not an offer to buy or sell any security. Composite returns are presented net of advisory fees and
brokerage commissions. Performance reflects the reinvestment of dividends and other earnings. Performance for periods of less than one year has not been annualized. Performance, cost
basis, unrealized gain/losses, and realized gains/losses calculated and reported by Parametric may vary from official custodial statements based on different accounting procedures, reporting
dates or valuation methodologies for certain securities. Past performance is not indicative of future results. It is not possible to invest directly in an index; they are unmanaged and do not
reflect the deduction of fees, taxes and expenses. This strategy is offered by the Parametric Custom Tax-Managed & Centralized Portfolio Management segment of Parametric. See
Disclosures for additional information.
©2017 Parametric Portfolio Associates® LLC.
Not FDIC Insured. Not Bank Guaranteed. May Lose Value.
PARAMETRIC CUSTOM CORETM ‌U.S. LARGE CAP
BENCHMARK: S&P 500®
25%
Parametric Weights vs.
Benchmark (as of 6/30/2017)
22.0% 22.3%
20%
Parametric portfolios are primarily invested
in equities, maintaining under 2% cash.
Source: FactSet
Research Systems.
14.6% 14.6% 14.1% 14.5%
15%
12.3%12.3%
10%
10.8%
10.3%
9.6% 9.1%
6.0% 5.9%
5%
Parametric (%)
Benchmark (%)
0%
Top 10 Holdings % (as of 6/30/2017)
Apple Inc.
Microsoft Corporation
Amazon.com, Inc.
JPMorgan Chase & Co.
Johnson & Johnson
Facebook, Inc. Class A
Wells Fargo & Company
Berkshire Hathaway Inc. Class B
Exxon Mobil Corporation
Alphabet Inc. Class A
3.94
2.63
2.02
1.72
1.66
1.55
1.44
1.42
1.38
1.35
Information
Technology
Financials
Health Care
Consumer
Discretionary
Industrials
Consumer
Staples
Portfolio Statistics (as of 6/30/2017)
Parametric S&P 500
®
Capitalization ($ Millions)
Wt. Average Mkt. Cap
Wt. Median Mkt. Cap
173,252
168,952
91,992
88,127
Other Statistics
No. of Securities
300
505
Beta
0.99
Dividend Yield %
P/E Ratio
Price/Book
1.95
1.00
1.94
17.47
17.56
3.00
2.95
3.0% 3.2%
2.8% 2.9%
2.7% 2.9%
Utilities
Real Estate
Materials
Energy
2.1% 2.1%
Telecom.
Services
Source: Parametric & FactSet as of 6/30/2017.
For illustrative purposes only. Top ten holdings are
provided for a representative account based on
weightings, not performance, and are not indicative
of the entire composite. Individual client portfolio
holdings will vary and there is no guarantee that
a particular client’s account will hold any, or all,
of the securities identified. This is not an offer or
recommendation to buy or sell securities. It should
not be assumed that any of the securities listed
were or will be profitable. Investments are subject
to change without notice and may no longer be
applicable. Forward Price to Earnings (P/E) Ratio
is obtained from FactSet. Forward P/E is defined
as the current market price divided by the expected
earnings over the next 12 months.
Leadership Team - Seattle Investment Center
Rey Santodomingo, CFA
Managing Director - Investment Strategy
Strategist for Custom CoreTM
Disclosures
Parametric Portfolio Associates® LLC (“Parametric”) is an affiliated investment advisory firm registered with the U.S. Securities
and Exchange Commission. Parametric is headquartered in Seattle, WA and has investment centers in Seattle, WA; Minneapolis,
MN; and Westport, CT providing investment management services. The Minneapolis investment center was formed following
the purchase of the assets of the Clifton Group Investment Management Company in December 2012. The Westport investment
center resulted from the consolidation of the operations of Parametric Risk Advisors LLC into Parametric in December 2016.
This material may contain confidential and/or proprietary information, composite and/or account specific portfolio holdings, and/
or assumptions based on dissimilar period comparisons, and may
only be relied upon for this report. This is not an offer to buy or
sell any security and does not include a complete list of all securities purchased or sold in the period or for all clients. Actual
holdings will vary and there is no guarantee that any client will hold
any mentioned positions. No security or discipline is profitable all
of the time and there is always the possibility of loss. Returns
presented were generated using Parametric’s proprietary rulesbased investment methodology as described in ADV Part 2A, are
unaudited and may not correspond to any other published data.
Parametric is not a tax consultant and does not provide tax advice.
Clients should seek other professional assistance before investing. Investment risks may include but are not limited to: market,
economic, political, interest rate, currency exchange, leverage,
liquidity, credit quality, trading, and client specific restrictions. Information is subject to change without notice.
Composite Criteria
Custom CoreTM – Benchmark: S&P 500®. Benchmark is for
reference only. Management seeks exposure to U.S. large cap
equity securities. The S&P 500® Index is comprised of the 500
largest ranked U. S. companies.
Complete composite data is available upon request. Data reflects
performance of tax-managed accounts benchmarked to the S&P
500 that are funded with cash and are free from client-directed
investment restrictions. Because Parametric manages each account to reflect client-specific characteristics, accounts funded
with securities and/or subject to restrictions will experience varying performance. Performance may be positively or negatively
affected for individual returns. Derivatives trading and short selling may materially increase investment risk and potential returns.
These risks may include but are not limited to margin/mark-tomarket cash calls, currency exchange, liquidity, unlimited asset
exposure, and counter-party risk.
Account Criteria
Paul Bouchey, CFA
Chief Investment Officer
Accounts are fully discretionary. No minimum balance required.
Accounts are included in a composite in first full month of management and excluded after the last full month of investment.
Terminated accounts are retained in composites for the full period
of investment.
Calculation Methodology
Account performance is calculated using the time-weighted, dailylinked total return methodology, and reflects the reinvestment of
dividends, interest, gains and other income. Composite returns
are market-value weighted using beginning of month valuations.
Composite gross returns are inclusive of transaction costs, any
foreign withholding taxes and other direct expenses, but exclusive of management fees, custody charges and other indirect
expenses. Starting Q4 2016, composite net returns reflect the
deduction of a 0.35% annual management fee – the highest paid
by any client in this composite. Prior to Q4 2016, composite net
returns reflect the deduction of a 0.45% annual management fee.
After Tax Performance
When calculating after-tax returns, Parametric applies the client’s
individual tax rate (which may include federal and state income
taxes), if provided by the client. If the individual tax rate is not
provided by the client, Parametric applies the highest U.S. federal
tax rates. For short-term gains, the highest U.S. federal marginal
income tax rate is 39.6% plus the 3.8% net investment income
tax, for a combined rate of 43.4%. For long-term gains, the highest U.S. capital gains tax rate is 20% plus the 3.8% net investment income tax, for a combined rate of 23.8%. These assumed
tax rates are applied to both net realized gains and losses in the
portfolio. Applying the highest rate may cause the after-tax performance shown to be different than an investor’s actual experience. Investors’ actual tax rates, the presence of current or future
capital loss carry forwards, and other investor tax circumstances
will cause an investor’s actual after-tax performance to be over or
under Parametric’s estimates presented here. In periods when net
realized losses exceed net realized gains, applying the highest tax
rates to our calculations illustrates the highest after-tax return that
could be expected of the portfolio, and assumes the maximum
potential tax benefit was derived. Actual client after-tax returns
will vary. As with all after-tax performance, the after-tax performance reported here is an estimate. In particular, it has been assumed that the investor has, or will have sufficient capital gains
from sources outside of this portfolio to fully offset any net capital
losses realized, and any resulting tax benefit has been included in
Parametric’s computation of after-tax performance.
Performance, cost basis, unrealized gain/losses, and realized
gains/losses calculated and reported by Parametric may vary
from official custodial statements based on different accounting
©2017 Parametric Portfolio Associates® LLC.
Not FDIC Insured. Not Bank Guaranteed. May Lose Value.
1918 Eighth Avenue, Suite 3100, Seattle, WA 98101 206.694.5500 www.ParametricPortfolio.com
1924 7.24.17
Thomas Seto
Head of Investment Management
procedures, reporting dates or valuation methodologies for certain
securities. Client performance summaries and any related data
produced by Parametric are not audited. Clients are encouraged
to carefully review and compare the official custodial records with
the various data and performance statistics reported by Parametric.
Benchmark after-tax returns are simulated for each benchmark
portfolio using a hypothetical, after-tax benchmark portfolio with
the same inception date, cash flows, cost basis, and tax rates
as the client portfolio. The after-tax benchmark’s capital gain realization rate is based on the average turnover rate of the pre-tax
benchmark and ending gain or loss of the after-tax benchmark
for each period. Dividend income is estimated using the pre-tax
benchmark index’s dividend return during the period. After-tax
benchmark returns reflect the deduction of taxes, but do not include any other fees or expenses. After-tax benchmark returns
are hypothetical, do not reflect actual trading, and may not be
relied upon for investment decisions.
The S&P index(es) (“Index”) is a product of S&P Dow Jones
Indices LLC and/or its affiliates and has been licensed for use
by Parametric. Copyright © 2017 by S&P Dow Jones Indices
LLC, a subsidiary of the McGraw-Hill Companies, Inc., and/or
its affiliates. All rights reserved. Redistribution, reproduction and/
or photocopying in whole or in part are prohibited without written
permission of S&P Dow Jones Indices LLC. For more information on any of S&P Dow Jones Indices LLC’s indices please visit
www.spdji.com. S&P® is a registered trademark of Standard &
Poor’s Financial Services LLC and Dow Jones® is a registered
trademark of Dow Jones Trademark Holdings LLC. Neither S&P
Dow Jones Indices LLC, Dow Jones Trademark Holdings LLC,
their affiliates nor their third party licensors make any representation or warranty, express or implied, as to the ability of any index
to accurately represent the asset class or market sector that it
purports to represent and neither S&P Dow Jones Indices LLC,
Dow Jones Trademark Holdings LLC, their affiliates nor their
third party licensors shall have any liability for any errors, omissions, or interruptions of any index or the data included therein.
Parametric makes no representation or endorsement concerning
the accuracy or propriety of information received from any other
third party.
Investments are subject to change without notice. All information
is believed to be correct but accuracy cannot be guaranteed.
For more information regarding Parametric and its investment
strategies, the firm’s list of composite descriptions, or to request a copy of Parametric’s Form ADV, please contact us at
206.694.5575 or visit our website, www.parametricportfolio.com.