From FT Alphaville:
GMO: on the comeback trail
Gallons of ink has been spilled on the question of when value-investing -- the practice of buying treasure priced like trash -- will begin to outperform the market after a torrid decade of returns.
To add to the literature is Grantham Mayo van Otterloo’s (GMO) Ben Inker, Head of Asset Allocation at the storied investment firm, who addressed the potential for a reversal in its third quarter letter, released Thursday.....MUCH MORE
In short, the current market reminds him of 2000 -- when the Nasdaq bubble peaked, and EM debt was ebbing near its lowest points -- and that’s reason for some cautious optimism. Well, for its portfolios at least.
From the quarterly letter:
Ever since 2000, we have always assumed that neither the pain from the 1990s, nor the opportunity set that the pain created, would come our way again. And on a day-to-day and month-to-month basis, nothing quite like it has occurred. But there is more than one way for things to get to extremes. The performance of some of our strategies is once again approaching the 1990s-style cumulative pain level...Eeek. No one likes impatient clients in the asset management world. Fear not though Inker says, because the expected returns for two of GMO’s funds have never looked better...:
While the magnitude of our underperformance has been 20% to 25% less than it was last time around, its duration has been particularly painful. This period has lasted over 10 years instead of the 5 years of the late 1990s. Unsurprisingly, our clients are once again finding their patience wearing thin.
