The GMO Alternative Allocation Fund seeks to generate positive total return by investing in a diversified portfolio of underlying alternative strategies, all run by GMO teams.
Underlying strategies will include but are not be limited to: merger arbitrage/event-driven, global macro, fixed income absolute return, asset allocation long/short, long/short and market neutral equities, high yield, and systematic put writing strategies. The Fund’s success will be linked to the following differentiated features:
- Dynamic allocation on two levels:
- Top-down. The GMO Asset Allocation team will calibrate the aggregate level of portfolio risk, especially at valuation extremes, when investors need risk management the most.
- Bottom-up. The underlying investment strategies will dynamically alter exposures and risk levels in an alpha-proportional manner.
- Diversity of risk and return.
- Portfolio construction and risk management will incorporate both low statistical and intrinsic correlations.
- The team will diversify by return source, combining strategies that are more skill-based, i.e. true alpha strategies, with those that harvest alternative risk premia.
- Efficient use of Capital. The team will employ overlays that enable exposures greater than 100%, when appropriate, but without borrowing or financing from a prime broker.
- Transparency and Liquidity. All strategies are run in-house. The portfolio management team has transparency, not just of positions but of the rationale and conviction levels of the underlying teams. Investors have daily liquidity.
- Experience. GMO has over 20 years of experience in managing individual alternative strategies and packaging them together into multi-strategy solutions.