Overview
The GMO Alternative Allocation Strategy seeks to generate positive total return by investing in a diversified portfolio of underlying alternative strategies, all run by GMO teams.
Underlying strategies are expected to include but are not limited to: merger arbitrage/event-driven, global macro, fixed income absolute return, asset allocation long/short, market neutral equities, high yield, and systematic put writing strategies. The Strategy’s success will be linked to the following differentiated features:
Dynamic allocation on two levels
- Top-down. The GMO Asset Allocation team will calibrate the aggregate level of portfolio risk, especially at valuation extremes, when investors need risk management the most.
- Bottom-up. The underlying investment strategies will dynamically alter exposures and risk levels in an alpha-proportional manner.
Diversity of risk and return
- Portfolio construction and risk management will incorporate both low statistical and intrinsic correlations.
- The team will diversify by return source, combining strategies that are more skill-based, i.e. true alpha strategies, with those that harvest alternative risk premia.
Efficient use of Capital - The team will employ overlays that enable exposures greater than 100%, when appropriate, but without borrowing or financing from a prime broker.
Transparency and Liquidity - All strategies are run in-house. The portfolio management team has transparency, not just of positions but of the rationale and conviction levels of the underlying teams. Investors have daily liquidity.
Experience - GMO has over 20 years of experience in managing individual alternative strategies and packaging them together into multi-strategy solutions.
GMO's Alternative Allocation Strategy
Facts
Performance
Documents
Literature
Commentary & Attribution
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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) Leveraging Risk: The use derivatives and securities lending creates leverage. Leverage increases the Funds losses when the value of its investments (including derivatives) declines. (3) Derivatives and Short Sales Risk: The use of derivatives involves the risk that their value may not change as expected relative to changes in the value of the underlying assets, pools of assets, rates, currencies or indices. Derivatives also present other risks, including market risk, illiquidity risk, currency risk, credit risk, and counterparty risk.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.