On October 13, 2025, GMO launched its newest ETF, GMO Dynamic Allocation ETF (GMOD). The ETF is managed by Co-Heads of Asset Allocation Ben Inker and John Thorndike, and draws on GMO’s proprietary 7-Year Asset Class Forecasts. It will typically range between 40% and 80% equity exposure and can invest broadly across stocks and bonds, not limited by sector, market cap, credit quality, or geography.
This would be an interesting but distinctly contrarian operation. The key is that GMO has a strong and well-founded belief that asset prices can diverge meaningfully from their true value but mean-revert to fair value over time. Called “mean reversion,” the idea is classically contrarian: dynamically increase exposure to the asset classes that are the most attractively priced while deemphasizing those that the team views as expensive. Those judgments are embodied in the team’s widely read and widely criticized 7-Year Asset Class Forecasts, with the portfolio’s exposures actively adjusted in response to shifts in GMO’s outlook on returns, risks, and market valuations. The problem is that irrational valuations have been incredibly sticky, which means that mean reversion has not been happening within the limit of most investors’ patience.
Currently, the team reports, “we are de-emphasizing US and growth equities where we believe that valuations are stretched, while being very happy to hold non-US and value equities which are trading at favorable valuations … Given the precarious valuations that the US and Growth have been driven to, this is, we believe, exactly the right time to be investing with someone who is not afraid to take contrarian positions. We are tremendously excited about the outlook for potential relative alpha.”
Investors can get some guidance about the likely trajectory of the ETF by looking at the performance of the 30-year-old GMO Global Asset Allocation Fund, which follows the same logic and which, the team allows, is “the closest benchmark to GMO’s new GMOD ETF and thus the most pertinent benchmark.”
GMO reports that “Since inception, 22 October 1996, the Fund (6.95% APR) has beaten its index (6.21%) by 74 bps per year. We show figures versus our custom benchmark, not the Lipper peer group.” Against the Lipper “flexible portfolio” peer group, the fund has trailed its peers by 50 bps since inception, but with dramatically less volatility.
GMO Global Asset Allocation Fund vs Lipper “flexible portfolios”
| 3 year | 5 year | 10 year | 20 year | Lifetime | |
| APR | 15.2 | 8.5 | 6.4 | 5.9 | 7% |
| APR vs peers | 3.1 | 0.1 | -0.6 | -0.7 | -0.5% |
| Sharpe vs peers | 0.36 | 0.3 | -0.4 | 0.2 | -0.1 |
| Downside vs peers | 1.2% better | 0.5% better | 0.5% better | 1.6% better | 0.6% better |
| Maximum drawdown | 1.9% better | 3.1% worse | 1.1% worse | 8.8% better | 7.9% better |
Source: MFO Premium fund screener and Lipper Global Datafeed
On the whole, the strategy has been consistently competitive in terms of total return, has had consistently less downside (measured by downside deviation and maximum drawdown), and has had slightly better risk-adjusted returns. That seems broadly consistent with Morningstar’s risk and return metrics as well. In addition, the fund’s three-year record has been exceptionally strong as the stranglehold of US + Growth has weakened.
GMO’s ETF lineup also includes QLTY (U.S. Quality), QLTI (International Quality), GMOV (U.S. Value), GMOI (International Value), BCHI (Beyond China), DRES (Domestic Resilience), and INVG (Systematic Investment Grade Credit).
The fund will charge 0.50%.
Bottom line: GMO is very, very disciplined. If market behaviors begin to normalize – which is to say, that things like profit margins or valuations revert to their means and markets are not inexplicably dominated by just five to ten corporations – that discipline, GMOs research, and their long record with multi-asset portfolios is likely to serve investors well.
