Making The Most of Value's Tailwinds

Despite headlines and swoons, equity markets have rallied strongly YTD and over the last 12 months, with developed ex-U.S. Value stocks outpacing most other groups. GMO International Value ETF (GMOI) has outperformed the MSCI World ex-U.S. Value by 3.6% YTD and by 6.3% over the trailing 12 months (NAV, through 7/31). Over this period, GMOI has also significantly
outperformed MSCI World ex-U.S. and S&P 500 indexes.


GMOI is an actively managed value portfolio; the key differentiator in its approach is the willingness to strongly lean into the current best valuation opportunity. Furthermore, the strategy incorporates both quality and growth as key determinants of valuation. Due to extraordinarily wide valuation spreads, GMOI has dialed deeply into the very cheapest stocks, resulting in a portfolio that trades at a discount to MSCI World ex-U.S. and MSCI World ex-U.S. Value.


Holding the most attractively priced names allowed the portfolio to significantly outperform the value index during a period when valuation was well-rewarded. The portfolio held up well despite the outbreak of conflict between the U.S. and Iran; selection within Energy has been positive, and key overweight positions (as of 7/31), such as Equinor (2%) and TotalEnergies (3.5%), have relatively limited exposure to the Strait of Hormuz. In addition to Energy, significant YTD contributors to excess return include Materials and Canadian Financials, where GMOI had strong selection in banks, including TD Bank (2.6%) and Bank of Nova Scotia (3.3%).

Sources of Potential Future Return

The team continues to see opportunities within international deep value and believes it offers a compelling, differentiated source of return, even after a period of strong performance. This outlook is supported by three sources of potential future return:

  1. International stocks trade at reasonable valuations (and a significant discount to the U.S. equity market)
    The international equity universe remains cheap relative to the U.S., with a P/E ratio of 20.9x, an almost 30% discount to the S&P 500’s 29.2x. U.S. companies need to deliver extraordinary results to grow into those valuations, whereas non-U.S. companies simply need to avoid disappointing too terribly. The burden of proof is on the U.S. equity market to justify its inflated valuations – we prefer to be hunting for bargains outside the U.S. 

    The GMOI portfolio trades at a 35% discount to the MSCI World ex-U.S. index and a 14% discount to the MSCI World ex-U.S. value index, making it ideal for investors who want to take advantage of today’s unusually disparate equity valuations.

  2. Value spreads remain historically wide
    Value stocks continue to trade at a considerable discount to growth stocks, and GMO fully exploits this advantage by dialing into the deep value cohort. Despite considerable realized outperformance, this segment continues to trade at a historically wide discount (20th percentile vs. history) due to high idiosyncratic volatility. A few upside surprises caused select stocks to reprice; GMOI has taken profit on these names and reinvested in cheaper stocks, maintaining its valuation advantage.

  3. Exposure to cheap currencies
    The U.S. dollar remains very expensive (79th percentile vs. history as of 7/31). Investors may benefit from exposure to cheaper currencies like the Euro and the Yen, either through currency appreciation or just stronger earnings growth, as companies operating in cheap currencies have a low-cost advantage.

U.S. DOLLAR REMAINS VERY EXPENSIVE

 

The U.S. dollar is just off its 40-year high

Line chart of the U.S. dollar real effective exchange rate from 1970 to 2025, rebased to an average of 100. The dollar fluctuates significantly over the period and ends around 115 in 2025, above its long-term average.

As of 6/30/26 | Source: BIS, GMO
Bank of International Settlements Narrow Real Effective Exchange Rate

Bottom Line

With non-U.S. equities trading at a meaningful discount to the U.S., value spreads still wide, and the dollar expensive, we believe GMOI remains well positioned for investors seeking a differentiated source of long-term return.

To go deeper on the investment thesis, explore the role of active portfolio rotation, and why GMO continues to see opportunities within international deep value, read our related research:

For the latest portfolio information, performance, holdings, and additional materials, visit the GMOI Fund Page.

STRONG OUTLOOK AND STRONG PERFORMANCE

As of 7/31/2026

 

YTD Total Return

Trailing 12 Month
Total Return

Price/Earnings Ratio
GMOI NAV (net of fees) 20.6% 42.4% 13.6x
MSCI World ex-U.S. Value 17.0% 36.1% 15.9x
MSCI World ex-U.S. 11.4% 25.0% 20.9x
S&P 500 10.1% 19.6% 29.2x

 

AVERAGE ANNUAL TOTAL RETURN
(EXCHANGE TRADED FUND, NAV) IN USD  

As of 6/30/2026

 

Inception

QTD

YTD

1-Year

Since Inception
GMO International Value ETF 10/28/2024 4.70 12.18 32.90 30.32
MSCI World ex-U.S. Value   8.15 10.85 29.33 28.65
Value Added   -3.44 1.33 3.57 1.67

 

AVERAGE ANNUAL TOTAL RETURN 
(EXCHANGE TRADED FUND, MARKET PRICE) IN USD  

As of 6/30/2026

 

Inception

QTD

YTD

1-Year

Since Inception
GMO International Value ETF 10/28/2024 3.87 12.07 32.62 30.36
MSCI World ex-U.S. Value   8.15 10.85 29.33 28.65
Value Added   -4.28 1.22 3.29 1.71

 

AVERAGE ANNUAL TOTAL RETURN
(EXCHANGE TRADED FUND, NAV) IN USD  

As of 7/31/2026

 

Inception

MTD

QTD

YTD

1-Year

Since Inception
GMO International Value ETF 10/28/2024 7.54 7.54 20.63 42.38 34.10
MSCI World ex-U.S. Value   5.56 5.56 17.01 36.07 31.07
Value Added   1.98 1.98 3.62 6.31 3.03

 

AVERAGE ANNUAL TOTAL RETURN
(EXCHANGE TRADED FUND, MARKET PRICE) IN USD

As of 7/31/2026

 

Inception

MTD

QTD

YTD

1-Year

Since Inception
GMO International Value ETF 10/28/2024 7.58 7.58 20.56 42.06 34.17
MSCI World ex-U.S. Value   5.56 5.56 17.01 36.07 31.07
Value Added   2.01 2.01 3.54 5.99 3.10
Performance data quoted represents past performance and is not indicative of future results. The investment return and principal value of an investment will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. Current performance data may be lower or higher than the performance data provided herein. To obtain performance information to the most recent month end, visit www.gmo.com.
Expense ratio of 0.60% is equal to the Fund’s Total Annual Operating Expenses set forth in the Fund’s most recent prospectus dated June 30, 2026 .
Exchange Traded Funds (ETFs) are bought and sold through exchange trading at market price (not NAV), and are not individually redeemed from the fund. Shares may trade at a premium or discount to their NAV in the secondary market. Brokerage commissions will reduce returns.
The MSCI World ex USA Value Index (MSCI Standard Index Series, net of withholding tax) is an independently maintained and widely published index comprised of  global developed markets, excluding the United States. MSCI data may not be reproduced or used for any other purpose. MSCI provides no warranties, has not prepared or approved this report, and has no liability hereunder. The MSCI World ex-USA Index (MSCI Standard Index Series, net of withholding tax) is an independently maintained and widely published index comprised of global developed markets, excluding the United States. MSCI data may not be reproduced or used for any other purpose. MSCI provides no warranties, has not prepared or approved this report, and has no liability hereunder.
The S&P 500 Index is an independently maintained and widely published index comprised of U.S. large capitalization stocks. S&P does not guarantee the accuracy, adequacy, completeness or availability of any data or information and is not responsible for any errors or omissions from the use of such data or information. Reproduction of the data or information in any form is prohibited except with the prior written permission of S&P or its third party licensors.
Returns shown for periods greater than one year are on an annualized basis.
The price-to-earnings (P/E) ratio is the proportion of a company's share price to its earnings per share (EPS). Price-to-Earnings Ratio based on one-year historical weighted median.
An investor should carefully consider the fund's investment objectives, risks, charges, and expenses before investing. This and other important information can be found in the fund's prospectus. To obtain a prospectus, please visit www.gmo.com. Read the prospectus or summary prospectus carefully before investing.

Risks associated with investing in the Fund may include: (1) Focused Investment Risk: The Fund invests its assets in the securities of a limited number of issuers, and a decline in the market price of a particular security held by the Fund may affect the Fund's performance more than if the Fund invested in the securities of a larger number of issuers. (2) Market Risk - Equities: The market price of equities may decline due to factors affecting the issuer, its industries, or the economy and equity markets generally. Declines in stock market prices generally are likely to reduce the net asset value of the Fund's shares. (3) Management and Operational Risk: The risk that GMO's investment techniques will fail to produce desired results, including annualized returns and annualized volatility. For a more complete discussion of these and other risks, please consult the Fund's Prospectus.

The GMO ETFs are distributed in the United States by Foreside Fund Services LLC. GMO and Foreside Fund Services LLC are not affiliated.

Disclaimer
The views expressed are the views of the Asset Allocation and Systematic Equity teams through the period ending July 31, 2026, and are subject to change at any time based on market and other conditions. This is not an offer or solicitation for the purchase or sale of any security and should not be construed as such. References to specific securities and issuers are for illustrative purposes only and are not intended to be, and should not be interpreted as, recommendations to purchase or sell such securities.