The GMO Alternative Allocation Fund seeks to generate positive total return, rather than "relative" return, by investing in a diversified portfolio of underlying alternative strategies, all run by GMO teams. The Fund seeks low beta and low correlation to traditional equities and other risk assets.
Underlying strategies will include but are not be limited to: merger arbitrage/event-driven, global macro, fixed income absolute return, asset allocation long/short, long/short and market neutral equities, high yield, and systematic put writing strategies. The Fund’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.