Bringing an idea to life
Bill Cornelius, Mark England-Markun, and Randy Lert launch Parametric
Parametric builds its first direct indexing portfolio
Rising to the challenge
Parametric joins forces with some powerful partners
Making new friends
Parametric expands its influence
Spreading our wings
Parametric becomes part of Morgan Stanley
Gaining new resources
We’re proud of our past, but we’re busy making new Parametric history. Learn more about what we do or get in touch.
The journey continues
A brief history of Parametric
It started with a question. What if the stories traditionally told about a publicly traded company—its products, its management team, its assets, its liabilities, and other things one might read in an annual report—were just that: stories? What if there were more value in looking at stocks’ risk-return attributes than in companies’ balance sheets? What if you could engineer a purely quantitative, systematic, scientific way to invest? Three men were convinced they could.
The three were working at Russell Investments in Tacoma, Washington, when they decided to break out on their own. They devoted themsleves to a then-new investing discipline: one centered around the principles of market efficiency, transparency, attention to cost and risk, and a healthy skepticism of traditional active management.
With seed money from Pacific Mutual Life Insurance (PIMCO’s initial parent company), they called their new firm Parametric, naming it after a mathematical equation commonly used to describe the relationship among points on a curve—that is to say, its parameters. To some it may have sounded nerdy, but to a fledgling company focused on using technology to execute its mathematical strategies, it fit.
What’s in a name?
And speaking of technology, computing power—the lifeblood of any firm attempting to deliver on its quantitative strategies—was relatively primitive in the late 1980s. What today we can produce in a few moments took those early systems hours (sometimes even overnight) to churn out.
Is it the future yet?
It was the seed of direct indexing and what would eventually become our Custom Core® SMA strategy, and it began simply by listening to a client’s need and figuring out how to meet it. Not only does Custom Core remain one of our most prominent solutions, but that same family office is still a client today.
A new era
To help address an investment challenge faced by a large family office, we created our first custom portfolio designed around a client-chosen benchmark. The investor sought a portfolio that behaved like an index but was thoughtful about taxes—without compromising pretax performance.
Yeah, we can do that
The Minneapolis-based Clifton Group worked largely in the derivative overlay space, helping insitutional investors solve exposure challenges. Clifton’s systematic, quantitative approach made it a good match, and we joined forces in 2012, catapulting Parametric’s AUM to close to $92 billion.
In 2007 we invested in and eventually acquired Managed Risk Advisors, a Westport, Connecticut–based firm that specialized in options and other derivatives. This added another dimension to the customization Parametric could offer its clients, and by 2011 the firm had over $41 billion in AUM. But we didn’t stop there.
Exploring our options
Parametric parted ways with Pacific Mutual in 2001 and went independent. But we remained open to a long-term relationship with the right strategic partner. That partner came in the form of Boston-based asset manager Eaton Vance, which took a majority stake in Parametric, bolstering our direct indexing business by providing access to advisory platforms, support for product development, and distribution expertise.
Wicked smart move
In 2021 we sponsored an in-depth research report on direct indexing with Cerulli Associates, cementing Parametric’s status as the leading direct indexing provider. And in April 2022 we expanded our ad campaign to broadcast TV, airing 30-second spots on CNBC shows such as “Closing Bell,” “Squawk Box,” and “Fast Money.”
In August 2020 we launched print, digital, and radio ads in the “Wall Street Journal,” "Barron’s,” “Financial Times,” NPR’s “Marketplace,” and a number of other media outlets. The campaign’s tagline, “Custom to the Core,” and its “Let’s partner to make passive investing personal” message were designed to appeal to financial advisors whose clients want more from their passive investments than a one-size-fits-all ETF.
Making Parametric famous
At the 2019 Inside ETFs conference, one of the presenters name-checked Parametric and dubbed direct indexing the next big industry disruptor—an “ETF killer,” he called it. We weren’t at the conference, but we were pleasantly surprised to learn that this thing we’d been doing for close to 30 years was suddenly attracting a lot more notice. We decided to carpe this diem.
People are talking
Indeed, the same ideas that animated the firm in 1987 still reverberate today: efficiency, transparency, attention to cost and risk, and listening intently to client needs—and then building a custom portfolio around them. The people may have changed. The technology may be different. But Parametric continues to foster a culture that never stops asking, “What if?”
A foundation for the future
Today Parametric manages more than $400 billion in assets across an array of products and strategies, including not just Custom Core and overlay but also responsible investing, factors, emerging markets, liquid alternatives, fixed income, and more. We’re a proud part of the Morgan Stanley family but also proudly independent in our approach and spirit.
True to ourselves
As direct indexing’s AUM continued to grow, the major investment banks came knocking. Parametric’s profile and potential attracted Morgan Stanley’s attention, and, along with Eaton Vance and ESG thought leaders Calvert, the firms became one.