Overview
The GMO Systematic Investment Grade Credit Strategy seeks to generate total return in excess of its benchmark, the Bloomberg U.S. Corporate Index, by employing a factor-based bond selection process.
The process utilizes a systematic approach, where bonds are cross-sectionally scored according to proprietary value, quality, momentum, and issuer fundamental signals. The portfolio construction process relies on a robust and flexible mean variance optimization setup that attempts to maximize alpha while simultaneously minimizing tracking error, subject to constraints. Constraints are dictated by the investment universe and portfolio guidelines, but often include bounds on active country, sector, and issuer concentrations while considering interest-rate, spread, and key-rate duration exposures. Liquidity screening provides a filtered universe that is tradeable in the secondary market, and turnover is managed to help contain transaction costs within a budget. Additionally, GMO’s proprietary Environmental, Social, and Governance (ESG) scores are utilized in the process, first to help filter out the lowest rated issuers from the investible universe, but also within portfolio construction to tilt the final portfolio toward more positively scored issuers.
Facts
Performance
Documents
Literature
| Fact Sheet | Download | |
| Product Primer | Download | |
| GIPS® Composite Report | Download | |
| Download All | Download |
Commentary & Attribution
| Commentary Quarterly | Download | |
| Download All | Download |
Risks
Risks associated with investing in the Strategy may include: (1) Management and Operational Risk: The risk that GMO's investment techniques will fail to produce desired results, including annualized returns and annualized volatility. (2) Market Risk - Fixed Income Investments: The market price of a fixed income investment can decline due to a number of market-related factors, including rising interest rates and widening credit spreads or decreased liquidity stemming from the market's uncertainty about the value of a fixed income investment (or class of fixed income investments). (3) Credit Risk: The risk that the issuer or guarantor of a fixed income investment or the obligor of an obligation underlying an asset-backed security will be unable or unwilling to satisfy its obligation to pay principal and interest or otherwise to honor its obligations in a timely manner.For a more complete discussion of these risks and others, please consult the Fund's offering documents. This is not a complete list of risks associated with investing in the Strategy. Please contact GMO for more information.