Sponsored by Parametric
Reuben Butler, Managing Director, Corporate Development, Parametric
Can you tell us about the history of Parametric and its culture?
Parametric was founded in 1987 to devote itself to a then-new discipline centered around the principles of market efficiency, transparency, attention to cost and risk, and a healthy skepticism of traditional active management. But the Parametric of today really got started in 1992, when a family office client asked us about customizing and tax-managing a passive portfolio that tracked a benchmark. That started us down the path of what today many in the industry call direct indexing but that we call our Custom Core® solution. That family office client is still a client today.
We’ve grown over the years through a couple of acquisitions, and were acquired by Eaton Vance in 2003, which has helped us offer solutions to both individual clients through our advisor partners as well as institutions. Today, we manage about $350 billion in assets for about 100,000 separately managed accounts (SMAs).
Our culture hasn’t fundamentally changed since inception. It’s about partnering with our clients, whether that be an advisor or an institution. We’re pragmatic. We’re transparent. We’re consultative. We’re innovative. We think of our approach as scientific. We’re heavy on math and technology—not quantitative, per se, but we’re not in the business of active stock picking. Nothing wrong with that, but it’s just not in our wheelhouse. We take pride in the rigor and skepticism that we bring to investing. It’s been in our DNA from day one, and it remains in our DNA today.
Our culture is collegial and not hierarchical. A lot of people are surprised when they visit us. There are no cubicle walls, no individual offices—not even for our CEO. In fact, if you come to our offices, you wouldn’t know who the CEO is because he sits with us. He likes to move his desk around so he can get to know the employees and understand what’s happening across all aspects of the business. We total 600-plus people across six offices, but it’s a flat organizational structure. The culture is geared toward being a meritocracy in which good ideas win and egos are out.
Providing a high level of service, especially as it pertains to direct indexing and SMAs, is paramount to your business. How has the pandemic tested your approach?
The pandemic was a left-field event for us, as it was for most businesses. But we adapted very quickly. In a matter of days, we went from being 100% in the office to effectively 100% out of the office, which is attributable to the talent of our technology, operations, and business continuity teams. We didn’t skip a beat, and that’s in the context of extreme market volatility and a lot of client requests. To be sure, there were a lot of long work days and a lot of all-hands-on-deck, but the systems held, our people answered the call, and we continued to serve the needs of our clients.
The real challenge initially was the connection piece. We could no longer meet with clients in person. I think I had used Skype and FaceTime on my phone maybe once or twice before. I don’t think I’d ever been on Zoom. Fast forward, and we’ve all adapted to using these technologies.
Communicating with our employees was equally important. In the past I rarely sat at my desk for more than half an hour at a time. I was used to walking around and talking to people, seeing what’s going on. How do you re-create that in a virtual sense? We implemented a weekly town hall that I moderated. They evolved from informational sessions to discussing cultural events, giving updates on different parts of the business, fun stuff, and charitable giving.
If anything kept me up at night, it was how our people were feeling. I take pride in having a lot of conversations with our staff. You can sense when somebody’s stressed out dealing with balancing kids and work and everything else. It’s so critical because if our employees are to do their jobs and provide the high service level our clients have come to expect from Parametric, their headspace has to be right; their work-life balance has to be right.
Parametric has a long history of applying ESG to its solutions. Can you discuss why you see ESG becoming more important, particularly in the context of diversity and inclusion?
Parametric manages about $29 billion in ESG AUM across 3,500 to 4,000 different accounts. It’s a big part of our business.
ESG discussions have been around for a long time, but in the past they didn’t tend to go much beyond that—a lot of talk, very little action. But lately things have changed, from concerns around climate change, gender issues, the killing of George Floyd and what that brought forward, board diversity, pay inequality—these are all things that are more than just headlines. They’re societal challenges. And now they’ve been pushed to the fore. The demand now is not just for talk but to start showing meaningful action. In our industry investors of all stripes, from individual investors to big pension plans are speaking ever more clearly about what they want to see. They’re saying, “You want to get our assets? Here’s what you have to be able to show us.”
So we see demand from our institutional clients and from advisors, and the role we play isn’t just to implement ESG-driven portfolios but also to educate around the subject. Our director of responsible investing writes often in our blog on topics such as active ownership, portfolio screening, and when one may make more sense than the other. The point is to help our clients make informed decisions and invest in a way that’s most meaningful to them.
Innovation has always been a core component of your business. Can you tell us why you think that is?
I often like to tell people that because Parametric was born in Seattle, home to companies like Nordstrom, Microsoft, Amazon, and Starbucks, innovation is in our DNA. But really the best ideas we come up with are a product of the dialogue we have with our clients—sitting down with them and understanding their investment objectives and needs and finding a customized solution for them. A good example of this was when a client approached us to create a custom ESG screen to exclude companies with involvement in human trafficking. As our clients’ needs continue to expand, we expand.