An essential tool for managing large pools of capital, derivative overlays help manage risk elements and improve performance. Russell Investments offers an overlay platform that supports a broad range of derivatives-based solutions.
We comb through your portfolio in search of slippage—inefficiencies that lead to lower return and higher risk. Through the use of a derivatives overlay, we can correct the underlying source of slippage.
Beta management for portable alpha
We use derivatives to manage the beta (market) exposures associated with portable alpha strategies. We work with you to determine the best instruments to use for your particular strategy—typically futures, swaps or a combination of the two.
Many investors recognize that they are exposed to interest rate risk, but do not have high confidence this exposure will add value. Hedging this risk through increased physical bond holdings may not be feasible or desirable given the investment opportunity cost. Learn more about our LDI implementation capabilities
A derivatives overlay allows you to gain interest rate exposure synthetically, while leaving most of your cash available for return-seeking strategies.
Additional applications for overlays
Efficiently manage multiple exposures at the total fund level.
Effect changes resulting from major shifts in your asset allocation or mergers of multiple plans, independent of the movement of physical securities.
Tactical asset allocation
Implement tactical tilts around a long-term policy target.
Add or remove currency exposures.
Episodic cash flows
Manage contributions into and disbursements from your portfolio more efficiently.
Please remember that all investments carry some level of risk, including the potential loss of principal invested. They do not typically grow at an even rate of return and may experience negative growth. As with any type of portfolio structuring, attempting to reduce risk and increase return could, at certain times, unintentionally reduce returns.