GMO forecasts

The new GMO asset class return forecasts are out.

The new ones, are just like the old ones.

I suppose they are sticking faithfully to their process, and I don’t really know how they set/structure/implement based on these SAA inputs, but obviously you would have absolutely done your dough had you followed the implied outcomes (in other words, they’ve been very negative for about the last 10 years, and the portfolio outcomes would have been so far behind the benchmark as to be unworkable).

Whenever you are feeling bearish, which happens all the time in this job, such data is “latch-able, grab-able, anchors you” quite quickly. We want to be mindful of what other investors are thinking, and indeed a part of our long run capital market assumptions come from “what do we think, and why”, and “what do others think, and why”.

Perhaps an implied takeaway is one we already follow, namely, diversify. We’ve got some value tilts on, we’ve got the corollary, which is an underweight to growth, we’ve got a bit less US equities than the benchmark, we’ve got a bit more Europe, Japan, even the UK, than the benchmark, we’ve started allocating a little bit to credit, we even bought a very small amount of gold exposure (producers) in our direct equity sleeves.

All at the margin.

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