The GMO High Yield Strategy seeks to generate total return in excess of that of its benchmark, the Markit iBoxx USD Liquid High Yield Index, by applying a systematic, factor-based approach to portfolio construction. It is designed to capture alpha from top-down sources of risk premia, taking advantage of structural market inefficiencies, while maintaining a liquid portfolio. Our top-down, data-driven approach (in what is still largely a fundamentally managed asset class) brings a unique perspective that allows us to allocate capital across a range of high yield instruments in order to seek the best possible risk-adjusted returns over a full market cycle.
GMO’s High Yield Strategy uses a top-down, factor-based, systematic approach designed to exploit four inefficiencies we have identified in the high yield asset class. To improve alpha, we actively shift our portfolio allocations between these inefficiencies according to market pricing. The resulting Strategy is a compelling investment solution for investors looking for active, liquid, U.S. high yield exposure and has delivered excess returns with low – and oftentimes negative – correlations to more fundamentally oriented high yield managers.
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