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, and 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. 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.

Experience. GMO has over 20 years of experience in managing individual alternative strategies and packaging them together into multi-strategy solutions.