GMO Systematic Global Macro Trust

Asset Class: Alternatives

Description: Global Macro

  • GMO is a global asset management firm, with the Systematic Global Macro Trust being managed entirely out of its Sydney office. The investment team led by Jason Halliwell looks after over $11 billion of assets for international and local clients in Systematic Global Macro strategies. While GMO started developing quantitative investment methods in the 1980's, and Jason Halliwell has been personally involved in this field since the 1990's, the strategy in its current form has been running since 2002. 
  • The strategy invests in a wide variety of markets across equity, fixed income, commodity and currency asset classes. It combines long positions in markets that offer attractive return opportunities with short exposures in markets that appear expensive. The strategy is managed dynamically, so the portfolio can change quickly, but will always be diversified across many asset and sub-asset classes. For example, the portfolio may be long UK & Asian equities, short US equities, long Australian bonds, short UK bonds, long Japanese Yen, short Swiss Franc etc... all at the same time. 
  • The two main drivers of the strategy are the Value and Sentiment factors. Value serves to identify the most/least attractive markets, while sentiment prevents entering positions too early or exiting too soon. We found that there is a lot of commonality between this strategy and InvestSense's own investment philosophy, specifically around the importance of diversification across asset classes and the valuation of assets as a driver of long-term expected returns (although InvestSense doesn't use any sentiment indicator as a complement). We also like that while the strategy is systematic in nature, the investment team can to deviate from the model in instances where it believes the model doesn't capture the reality. We think that having a "man behind the wheel" can prevent some of the main pitfalls in quantitative investing. 
  • The correlation of the strategy to traditional asset classes has been, on average, historically very low. We would point out that average correlations can be misleading, and indeed the correlation of the strategy to equity and bond markets has been positive, negative and neutral at various times. Combined with the strategy's target volatility of 10%-15%, we believe that it has a role to play as an alternative source of returns in a diversified portfolio, as long as investors are aware that this is a "growth" (rather than "defensive") alternative.