The GMO Tax-Managed Benchmark-Free Strategy seeks to generate positive after-tax total return, rather than "relative" return, by allocating dynamically across asset classes, free from the constraints of traditional benchmarks. Over a complete market cycle, the Strategy seeks annualized after-tax returns of 3% (net of fees) over the Consumer Price Index, as well as after-tax returns in excess of a custom tax-adjusted benchmark of 70% MSCI All Country World Index and 30% Bloomberg Barclays Municipal Bond 7-Year (6-8) Index.
The philosophy that underlies all of GMO’s Asset Allocation investment strategies is the belief that, at times and in the short term, the pricing of asset classes can deviate from true intrinsic value, but mean reverts to appropriate valuation levels over the long term. GMO’s proprietary 7-Year Asset Class Forecasts form the foundation of our investment process, providing a framework to assess the return opportunity embedded in different asset classes. We use that insight to allocate to what we believe are the most attractively priced asset classes. GMO’s Asset Allocation approach is flexible, not pre-determined by static allocations or benchmark-related ranges, constrained only by our unwillingness to overpay for an asset. We also seek to add value through security selection within both traditional and alternative asset classes.