Overview
GMO launched the Equity Dislocation Strategy in October 2020 to take advantage of an extraordinarily wide valuation spread between Value and Growth stocks. In this webcast, Ben Inker, Simon Harris, and Catherine LeGraw review performance and discuss the Strategy’s implementation, its fit in client portfolios, the current enticing opportunity set, and why the Strategy remains the biggest single position in our unconstrained portfolios today.
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*This content is intended for accredited investors only.
Key Points
- Equity Dislocation delivered compelling returns during the periods of Value outperformance in late 2020 and early 2021. While the Strategy gave back some early gains as Growth once again came into favor, disciplined implementation decisions have enabled it to meaningfully outperform a naïve long Value/short Growth construction.
- The Strategy’s implementation focuses exposure on the most misvalued stocks using GMO’s proprietary Price to Fair Value and Economic Book Value research.
- Country, sector, and individual position weights are carefully controlled to limit idiosyncratic risk in the portfolio.
- Clients have implemented this Strategy both as a hedge for venture capital and Growth equity exposure as well as a compelling stand-alone return opportunity.
- We believe the opportunity is still incredibly strong. If relative valuations revert to long-term average levels, a long global Value, short global Growth portfolio could generate strong absolute returns.
value is Extremely Cheap
As of 12/31/2021 | Source: GMO
Composite Valuation Measure is composed of price/sales, prices/gross profit, price/book, and price/economic book. Value and Growth groups are both sliced over 12 months.
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