Asset Allocation is a core competency of GMO, and multi-asset class portfolios represent a large portion of GMO’s assets under management. The Asset Allocation team believes that expected returns for asset classes change as valuations change, and these views are reflected in our 7-Year Asset Class Forecasts. The team’s process takes advantage of the changing opportunity set by actively rotating portfolio allocations and taking risk in line with the rewards on offer. By being valuation-sensitive investors, we successfully identified the Japanese Equity bubble (the 1980s), the Dot-Com bubble (the late 1990s), and the Global Risk bubble (the 2007-2008 timeframe), avoiding the permanent impairment of capital from the bursting of these bubbles.
GMO’s Asset Allocation team has managed asset allocation portfolios since 1988 and has been a pioneer in unconstrained, absolute return-oriented investing since first recommending this approach at our 1999 Fall Conference. With team members located in Boston, San Francisco, and London, the team can access both traditional (equity, fixed income, credit, cash) and alternative asset classes via strategies actively managed by other GMO investment teams. In this way, Asset Allocation draws on the investment expertise of the entire firm.