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Iconic Investor Jeremy Grantham’s GMO Loses $40 Billion In AUM Over Two Years

Monday, January 9, 2017 11:58
% of readers think this story is Fact. Add your two cents. / by Tyler Durden / Jan 9, 2017 9:40 AM

In the latest indication of the troubles facing the active management industry, iconic asset manager Jeremy Grantham, and his Boston money management firm, Grantham Mayo Van Otterloo, have seen an unprecedented slump in assets under management as a result of failing to generate return on par with the market, leading to mass investor defections.

As the WSJ first reported, Grantham “has been out of step with the market several times during the firm’s four decades. GMO has usually rebounded, with the 78-year-old investor earning acclaim with asset-bubble calls ahead of Wall Street busts in 2000 and 2008.” However, this time a recovery may probe problematic as the firm is “going through one of its roughest periods” and as a result assets under management have tumbled to about $80 billion, according to someone close to the matter, down from a peak of $124 billion in June 2014, a drop of 35% in two and a half years. The drop in assets has forced the firm to fire about 10% of its workforce, cutting some 65 jobs, in June last year.

The reason for GMO’s underperformance has been Grantham’s overarching skepticism about the viability of the market rally: “Bearish about what it sees as high valuations of U.S. stocks, GMO’s flagship mutual fund, the GMO Benchmark Free Allocation fund, has largely missed out on the latest rally in U.S. stock indexes.”

The skepticism means that the firm has generally underinvested at a time when all central banks have stepped in to avoid any notable market declines or corrections. According to the WSJ, GMO held about 7% of its assets in U.S. stocks as of the end of September, with 27% in cash, 16.9% in developed markets outside the U.S. and 20% in “alternative” strategies such as global “macro” investing, according to the firm. WSJ adds that GMO also had over 20% in emerging-market stocks and bonds—an investment that did nicely earlier in 2016 but has suffered in recent months following broad selloffs in credit securities.


The post Iconic Investor Jeremy Grantham’s GMO Loses $40 Billion In AUM Over Two Years appeared first on Silver For The People.


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