Events | 30 September 2022

Investing for Retirement III: Understanding and Dealing with Sequence Risk

Authors

Ben Inker

Mr. Inker is co-head of GMO’s Asset Allocation team, a member of the GMO Board of Directors and a partner of the firm. He joined GMO in 1992 following the completion of his bachelor's degree in Economics from Yale University. In his years at GMO, Mr. Inker has served as an analyst for the Quantitative Equity and Asset Allocation teams, as a portfolio manager of several equity and asset allocation portfolios, as co-head of International Quantitative Equities, and as CIO of Quantitative Developed Equities. He is a CFA charterholder.

Matt Kadnar

Mr. Kadnar is a member of GMO’s Asset Allocation team and a partner of the firm. Prior to joining GMO in 2004, he was an investment specialist and consultant relations manager at Putnam Investments. Previously, he served as in-house counsel for LPL Financial Services and as a senior associate at Melick & Porter, LLP. Mr. Kadnar earned his bachelor's degree from Boston College majoring in Finance and Philosophy and a JD from St. Louis University School of Law. He is a CFA charterholder.

James Montier

Mr. Montier is a Senior Advisor to GMO, consulting on economic and market research. Prior to joining GMO in 2009, he was co-head of Global Strategy at Société Générale. Mr. Montier is the author of several books including “Behavioural Investing: A Practitioner’s Guide to Applying Behavioural Finance”; “Value Investing: Tools and Techniques for Intelligent Investment”; and “The Little Book of Behavioural Investing.” Mr. Montier is a visiting fellow at the University of Durham and a fellow of the Royal Society of Arts. He holds a BA in Economics from Portsmouth University and an MSc in Economics from Warwick University.

Martin Tarlie

Dr. Tarlie is a member of GMO’s Asset Allocation team and the Head of NEBO. Prior to re-joining GMO in 2018, he was a managing director at QMA. He previously worked on GMO’s Global Equity team from 2007 to 2014. Prior to that he worked at Breakwater Trading and at Marlin Capital Corp as a fundamental equity analyst and the director of research. Dr. Tarlie earned his bachelor's degree in physics from the University of Michigan, his PhD in theoretical condensed matter physics from the University of Illinois at Urbana-Champaign, and his MBA from the University of Chicago. He was also a postdoctoral research fellow at the James Franck Institute at the University of Chicago and is a CFA charterholder.

This research is related to the newly launched Nebo platform, a portfolio construction tool that helps RIAs build better portfolios. Nebo bridges the gap between financial planning and asset management, and recently won the WealthManagement.com 2022 Industry Disruptor award.

Learn more about Nebo >

Overview

In this webcast, Ben Inker, James Montier, and Martin Tarlie discuss the genesis of their latest White Paper, "Investing for Retirement III: Understanding and Dealing with Sequence Risk."

*This content is intended for accredited investors only.

Key Points

Sequence of returns risk is a meaningful risk for the vast majority of investment portfolios and there are useful tools that can mitigate its effects.

~100 responses to invitation survey

91% response rate–thank you!

Nebo_Investing for Retirement III_Event - 9-29-2022_Exhibit 1.JPG

*44% replied “Yes”

We believe a multi-period, shortfall optimization framework that considers a client’s total investment horizon, financial needs, and circumstances accounts for sequence of return risk better than any standard single-period optimization.
By dynamically reallocating portfolios based on valuation, portfolio managers can substantially further improve outcomes for their clients.
The Nebo platform asks the right questions with respect to risk, takes into account investment horizon, and aligns the financial plan with the portfolio (see www.nebo-gmo.com for more details).

The Derby

Start with $1M at age 65, withdraw $50,000* every year

Nebo_Investing for Retirement III_Event - 9-29-2022_Exhibit 2.JPG

Source: GMO (charts top); Source: Robert Shiller, GMO (table)
*Withdraw $50,000 in real terms, **The stock weights in the Valuation Sensitive Optimal Shortfall results are constrained to lie between 20-percentage-point bands around the Optimal Shortfall stock weights. For the historical backtests, the results for the unconstrained Valuation Sensitive Optimal Shortfall strategy are 0.7% and 18% for the 4% and 5% withdrawal rates, respectively. For the Monte Carlo simulations, the unconstrained results for the 4% and 5% withdrawal rates are 2.7% and 13%, respectively. Historical backtests use Robert Shiller data from 1926-2018. Monte Carlo results are based on 10,000 simulations.

For additional information, please visit our Nebo website at nebo by GMO (nebo-gmo.com).

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Investing for Retirement III: Understanding and Dealing with Sequence Risk

This research is related to the newly launched Nebo platform, a portfolio construction tool that helps RIAs build better portfolios. Nebo bridges the gap between financial planning and asset management, and recently won the WealthManagement.com 2022 Industry Disruptor award.

Learn more about Nebo >

Overview

*This content is intended for accredited investors only.

Key Points

~100 responses to invitation survey

91% response rate–thank you!

*44% replied “Yes”

The Derby

Start with $1M at age 65, withdraw $50,000* every year

Register for full access to GMO's Research

Record Highs…But We’re Still Excited

By Asset Allocation Team

The Great Paradox of the U.S. Market!

By Jeremy Grantham

Horizons Strategy

Equities

Climate Change Strategy

Equities

Jeremy Grantham

Long-Term Investment Strategist, Co-Founder

Tom Hancock

Head of Focused Equity

Record Highs…But We’re Still Excited

By Asset Allocation Team

The Great Paradox of the U.S. Market!

By Jeremy Grantham

Horizons Strategy

Equities

Climate Change Strategy

Equities

Jeremy Grantham

Long-Term Investment Strategist, Co-Founder

Tom Hancock

Head of Focused Equity

Investing for Retirement III: Understanding and Dealing with Sequence Risk

This research is related to the newly launched Nebo platform, a portfolio construction tool that helps RIAs build better portfolios. Nebo bridges the gap between financial planning and asset management, and recently won the WealthManagement.com 2022 Industry Disruptor award.

Learn more about Nebo >

Overview

*This content is intended for accredited investors only.

Key Points

~100 responses to invitation survey

91% response rate–thank you!

*44% replied “Yes”

The Derby

Start with $1M at age 65, withdraw $50,000* every year

Register for full access to GMO's Research

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