Parametric Hedged Equity ETF

Parametric Hedged Equity ETF (PHEQ) holds 172 large US stocks chosen to track the Solactive GBS US 500 index. It adds S&P 500 options that soften moderate losses but limit gains. Its 0.29% expense ratio, set in the January 28, 2026 prospectus, ties for the lowest among similar funds, where the average is 0.48%. The trade-off is lower returns: the fund gained 12.09% in 2025, against 17.88% for the S&P 500.

• Over the year to Oct 27, 2026, PHEQ returned +10.8%, 3rd of 5 among similar funds.
• Its worst full calendar year was 2025 (+11.8%); its best was 2024 (+14.9%).
• The deepest fall in its price history was 12.6% (Feb 19, 2025 to Apr 8, 2025), recovered by Jun 26, 2025.

As of Jun 30, 2026, the fund held 172 securities; the ten largest made up 38.76% of assets.

By sector

• Over the three months to Jun 30, 2026, investors added a net $8.5M (creations minus redemptions, per the N-PORT report).
• Monthly total returns reported for that quarter: +5.34%, +1.93%, +0.57%.

Morgan Stanley issues the fund, and Parametric Portfolio Associates manages it as sub-adviser. The stock side is actively managed. The managers start from the Solactive GBS US 500, an index of the 500 largest US companies weighted by the value of their freely traded shares. They then use an optimization process, a computer model that matches the index on traits such as value, growth, size, volatility, momentum and sector. That means the fund doesn't hold every stock, and some weights differ from the index. Its stocks also overlap less than 70% with the S&P 500 options it holds, to avoid federal tax 'straddle rules' that can delay deductions for losses. The managers may sell losing stocks to realize tax losses that offset gains.

The hedge is a 'put spread collar.' The fund buys a put option (a contract that gains value when the market falls) about 10% below the S&P 500's level. It writes a second put about 30% below, and writes a call option whose premium roughly pays for both puts. In practice, the fund takes the first 10% or so of a market drop itself, has partial protection between roughly 10% and 30%, and takes losses beyond that. The call option caps its gains in a strong rally.

The hedges are 'laddered,' meaning they are set up at different times rather than all at once. So the actual protection levels on any given day may not be exactly 10% and 30%. Stock dividends are paid out quarterly.

• PHEQ charges 0.29% a year, versus an average of 0.48% for the similar funds below (1st of 5, cheapest first).
• Using the prospectus's standard example, $10,000 invested would cost about $30 in the first year and $368 over 10 years (assuming a 5% annual return).

It keeps most of its money in large US stocks but uses options to soften moderate market drops, so it has moved less than the S&P 500.

PHEQ launched on October 16, 2023, so it wasn't around for the 2008, 2020 or 2022 market declines. Its deepest drop was 12.6%, from February 19 to April 8, 2025. It recovered by June 26, 2025, about 2.6 months later. It has had no losing calendar year so far. Its one-year beta, a measure of how much it moves with the market, was 0.44 as of October 27, 2026. A milder drop could mean fewer shares need to be cashed out to fund spending in a bad year. The hedge covers only part of a deep crash, though, and the fund's gains have trailed the S&P 500.

Income is small: a 0.84% trailing yield as of October 27, 2026, paid quarterly. On $10,000, costs come to about $30 in the first year and $368 over ten years. Past results don't predict the future, and any plan should look at the whole portfolio, not one fund.

Matched by holdings overlap from the latest N-PORT reports.