Overview
In this webcast, Tom Hancock, Head of Focused Equity, discusses the genesis of GMO’s latest Quarterly Letter, The Quality Spectrum: Stability in an Unstable World. We extol the virtues of Quality, warn of some implementation pitfalls, and discuss why GMO’s long/short Quality Spectrum Strategy may prove particularly valuable in the environment that lies ahead.
Key Points:
- In a survey sent out prior to the webcast, GMO’s results found that over 50% of allocators are looking to increase their exposure to Quality in 2023, and 40% feel nervous about the equity exposure in their portfolio today.
- Valuation is important. A great business is not always a great stock. Historical data shows that Value within Quality can enhance return and improve downside protection.
- Don’t forget about Growth. High ROI Growth is worth a big premium and our current exposure of around 45% to Quality Growth has been our strongest performer this year.
- We believe GMO’s Focused Equity team is uniquely suited to run a fundamental/quant hybrid portfolio focused on Quality. We are excited about our Quality Spectrum Strategy, a net long Quality/short Junk portfolio. From November 2019 inception through the end of April 2023, the beta has been closer to 0.7 in a market that jumped almost 50%. Yet, when the market dropped almost 20% in 2022 as measured by the MSCI ACWI, Quality Spectrum fell less than 2% net of fees.
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