GMO Conference | 01 November 2022

Opportunities in Today’s Environment

Attractive Valuations in Many Areas

As the super-growth cycle is ending in dramatic fashion, we are already seeing some of the most attractive valuation opportunities in years.

Increasing rates and a sell-off in equities have led to a materially improved opportunity set from our valuation-oriented perspective. Today, the most important question for investors should not be whether to take risk in this environment, it should be where to take it. We believe it’s time to tap investment solutions that exploit value around the globe. At this year’s Fall Conference, we shared some of our highest-conviction, valuation-led ideas.

Explore our content below and Contact Us or your GMO representative for more information. Intended for accredited investors.

Featured Session:

Quality Investing in Interesting Times

There’s been no shortage of topics to keep things interesting for investors today – a looming recession, inflation, rising rates, geopolitical risks, and Covid (which is still a disrupting force, three years in). Tom Hancock, Lead Portfolio Manager of GMO Quality and Head of the Focused Equity team, and Kim Mayer, Quality Portfolio Strategist, discussed how each of these key issues impacted Quality in 2022 and the markets in general. They also explained what separated successful Quality strategies from the rest in this year’s bear market and why Quality stocks offer protection during both market downturns and inflationary times.

As of 9/30/22 | Source: GMO
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.
Quality is the highest quality 1/3 of the market on GMO’s metric blending profitability, stability, and leverage. Value within Quality is the low valuation half of that.

The Case for Small Cap Quality

Attractive short-term valuations and valuable long-term dynamics in small cap quality are finally aligned. Hassan Chowdhry and James Mendelson, Portfolio Managers of GMO’s new Small Cap Quality Strategy, shared why they believe investors can confidently add small cap quality to their equity portfolios despite heightened uncertainty for many risk assets.

(Anti)Trust the Process: How to Generate Uncorrelated (and Positive!) Returns in a Correlated World

Making money in a down market is not easy. In this session, Doug Francis, Sam Klar, and Cole Weppner from GMO’s Event-Driven team demonstrated how their approach to investing in situations with idiosyncratic outcomes can offer strong absolute return potential without dependence on traditional risk premium assets.

Systematic Global Macro: 20 Years of Uncorrelated Returns

Drawing on more than two decades of global macro investing at GMO, Jason Halliwell identified the characteristics that have enabled GMO’s Systematic Global Macro Strategy to flourish in a variety of market environments. Today especially, he sees an attractive outlook for liquid alternatives.

Value’s Attractiveness: How Has It Evolved and How Much Is Left?

Two years ago at GMO’s 2020 Fall Conference, we first highlighted the extraordinary valuation spread between cheap Value and expensive Growth stocks and launched GMO’s Equity Dislocation Strategy to take advantage of this historic opportunity.

At this year’s Fall Conference, Equity Dislocation Portfolio Manager Ben Inker and Carl O’Rourke, a Systematic Equity team quantitative researcher, provided an update on the ongoing attractiveness of Value relative to Growth. Even after Value’s recent significant outperformance, it is nowhere near back to its average relative valuation compared to Growth, which means the opportunity remains quite strong. And even if Value/Growth spreads do not continue to come back to historical averages, the act of rebalancing provides an incredible opportunity at today’s valuations.

Ben and Carl discussed the evolution of Equity Dislocation, which is long the cheapest Value stocks and short the most expensive Growth stocks and still our highest conviction Asset Allocation trade.

Energy Transition Opportunities: Clean, Green, and Obscene

Lucas White, lead Portfolio Manager of GMO’s Climate Change and Resources strategies, outlined what he believes are misunderstandings by the market about continued secular growth in both resources and climate equities. The energy transition is already creating long-term investment opportunities in these sectors, which currently trade at attractive discounts to the market.

Japan: An Active Manager’s Treasure Trove – Using Engagement to Unlock Shareholder Value

Japanese equities look attractive through both top-down and bottom-up lenses. Rick Friedman identified some of the secular and cyclical reasons why GMO likes Japanese Value equities today, while Colin Bekemeyer described the various ways GMO’s Usonian Japan Equity team generates alpha through company engagement.

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GMO Presenters

Hassan Chowdhry

Focused Equity

Mr. Chowdhry is engaged in portfolio management and research within GMO’s Focused Equity team. Previously at GMO, he was a member of the Global Equity team focusing on the Quality Strategy. Prior to joining GMO in 2007, he held analyst positions at Batterymarch Financial Management and Putnam Lovell NBF. Mr. Chowdhry earned his BS in Economics and BAS in Systems Engineering from the University of Pennsylvania, his MPA from Harvard University, and his MBA from the Massachusetts Institute of Technology.

Drew Edwards

Head of Usonian Japan Equity

Mr. Edwards is the Head of GMO’s Usonian Japan Equity team and a partner of the firm. Prior to joining GMO in 2020, he served as Portfolio Manager, Chief Investment Officer (CIO), and Chief Executive Officer (CEO) at Usonian Investments LLC. Mr. Edwards has been a member of the Usonian team since 2008. Prior to founding Usonian, he was Managing Director and Portfolio Manager at Advisory Research, Inc. Previously, Mr. Edwards had also been an investment professional at Taiyo Pacific Partners, an activist fund backed by CalPERS and W. L. Ross that focuses on Japanese equities, an investment banker at Lehman Brothers, and a finance executive in the health care industry. He earned his BA in International Business from Sophia University (Tokyo) and his MBA and JD from Northwestern University. Mr. Edwards is proficient in Japanese.

Doug Francis

Head of Event-Driven

Mr. Francis is engaged in managing GMO’s Event-Driven portfolio and a partner of the firm. Previously at GMO, he was a member of the Global Equity team. Prior to joining GMO in 2009, he was a managing director for Tisbury Capital Management LP. Previously, he was also a managing director (equities) for Sowood Capital Management LP and a managing principal at Pegasus Investments LLC. Mr. Francis earned his bachelor's degree in Economics from Trinity College and his MBA from Boston University.

Jason Halliwell

Head of Systematic Global Macro

Mr. Halliwell is the head of GMO’s Systematic Global Macro team and a partner of the firm. He joined GMO in September 1999 from Westpac Investment Management where he spent three years in research and development of quantitative tactical asset allocation methods. Mr. Halliwell has an honours degree in Commerce/Law from Queensland University and has completed postgraduate studies in Financial Mathematics at the University of Technology in Sydney. He is a CFA charterholder.

Tom Hancock

Head of Focused Equity

Dr. Hancock is the head of the Focused Equity team, a portfolio manager for GMO’s Quality Strategies and a partner of the firm. Previously at GMO, he was co-head of the Global Equity team. Prior to joining GMO in 1995, he was a research scientist at Siemens and a software engineer at IBM. Dr. Hancock holds BS and MS degrees from Rensselaer Polytechnic Institute and a PhD in Computer Science from Harvard University.

Ben Inker

Co-Head of Asset Allocation

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.

Sam Klar

Portfolio Manager, Event-Driven

Mr. Klar is engaged in managing GMO’s Event-Driven portfolio. Previously at GMO, he was a member of the Global Equity team. Prior to joining full-time in 2006, he held a co-op position at GMO with the Emerging Markets Equity team. Mr. Klar earned his bachelor's degree in Finance from Northeastern University.