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 by applying a systematic, factor-based approach to portfolio construction.
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.
Commentary & Attribution
Risks associated with investing in the Strategy may include Management and Operational Risk, Market Risk - Fixed Income, Credit Risk, Illiquidity Risk, and Derivatives and Short Sales Risk.