The GMO High Yield Strategy seeks to generate total return in excess of that of its benchmark, the Markit iBoxx USD Liquid High Yield Index. The Strategy aims to take long risk exposure in the U.S. high yield asset class in a more liquid format than the typical high yield portfolio.
We use a proprietary, factor-based model, which has identified several sectors of the high yield market that over time tend to generate superior returns compared to the index as a whole. While the model can allocate to several cash bond strategies within the high yield market, our tool kit also includes investment options such as ETFs, total return swaps on high yield indices, and the CDX market. The factor-based model dynamically adjusts the allocations to the different investment options using factors such as carry, roll down, ratings distribution, and spread, all compared to the index.