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PHEQ Hedges Equity Losses in 2025

BY | ETF Database
03/13/2025 | 124 VIEWS
  • Related Symbols
  • SPY
Escalating trade wars across a number of fronts continue to prove a significant drag on U.S. markets. Advisors and investors seeking hedges within U.S. equities should consider the Parametric Hedged Equity ETF (PHEQ A-) for its performance this year.This week the U.S. enacted 25% tariffs on aluminum and steel imports, sending markets sliding on Monday. Canada and the EU both responded with announcements of retaliatory tariffs of their own, which in turn prompted higher tariff threats from the current administration. The potential long-term knock-on effect of tariffs on inflation already weighed heavily on investors. The volatility and ratcheting trade war on several fronts adds uncertainty to that picture, and heightens recessionary concerns.PHEQ Outperforms, Hedges Drawdowns in 2025Those investors looking to hedge with some downside protection in equities would do well to consider Parametric Hedged Equity ETF (PHEQ A-). The fund seeks to provide capital appreciation while protecting against losses. PHEQ invests in U.S. large-cap stocks within the Solactive GBS US 500 Index while using options to hedge against drawdowns. The strategy optimizes the weights of its holdings to create a risk-and-return profile similar to that of the index. The fund currently outperforms the S&P benchmark YTD, measured using the SPDR S&P 500 ETF Trust (SPY A). The fund declined 2.71% since the beginning of the year compared to SPY’s 4.64% losses on a total returns basis, according to Y-Charts data. And while the fund caps upside potential, the downside hedge resulted in overall performance close to SPY over the last 12-month period.PHEQ employs a laddered options overlay strategy that sacrifices some upside potential for downside protection. It does so by using a put spread collar strategy wherein it buys close-to-the money protective puts and sells further out-of-the-money puts. Any loss mitigation is limited to that which the put spread covers. The fund ladders the one-year options across quarters to allow for optimal downside protection and upside capture. PHEQ also writes calls, thereby earning a premium to offset the put spreads. The fund engages in tax loss harvesting within its equity holdings to offset realized gains. It distributes a quarterly dividend and carries an expense ratio of 0.29%. For more news, information, and analysis, visit The ETF Yield Channel.

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