Alternative Allocation Strategy

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.