25 Years of Benchmark-Free Investing

GMO

Ben Inker

Research

11 Pages

GMO reflects on 25 years of benchmark-free investing, arguing that absolute risk and return matter more than tracking traditional allocations. The strategy delivered 5.7% annualized real returns net of fees versus 4.0% for 60/40, with a 19.3% maximum drawdown versus 35.7%, while today’s AI-led concentration echoes 1999.

Key Takeaways

Downside was lower: Since inception, Benchmark-Free returned 5.7% real net of fees versus 4.0% for 60/40, while maximum drawdown was 19.3% versus 35.7%.
Conviction changes exposure: Equity exposure fell to 25% by summer 2008, while liquid alternatives reached 60% by year-end 2021 ahead of the 2022 selloff.
Forecast gap widens: GMO forecasts roughly 5%-6% real returns for an unconventional portfolio versus about -2% to 0% for traditional 60/40, depending on rates.
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