Jeremy Grantham, co-founder of the investment company GMO, has repeatedly warned of a “super bubble” in recent months. The star investor is now pooling high-quality stocks in its own ETF.
• Jeremy Grantham urgently warns of “super bubble”
• GMO US Quality ETF in the wings
• “Quality Companies” included
Probability of “super bubble” bursting decreased
British investor Jeremy Grantham is best known for his warnings about a “super bubble”. The weak stock market year 2022 was only the “first and simplest phase” of the bursting of the stock market bubble “predicted by the market expert”, as Grantham explained in a text contribution for “MarketWatch” at the beginning of the year. In May, the stock market expert gave the all-clear, at least in part: at the Investment Research Conference in New York, he explained that the probability of a stock market crash had fallen from 85 percent to 70 percent. It is still too early for cheers, after all, the current market environment is still the perfect breeding ground for a crisis. Grantham has warned in the past about bloated tech stocks just waiting to implode and the Fed’s interest rate policy. Should the super-bubble actually burst, losses would spread across stocks, bonds, real estate and commodities.
GMO holds multi-billion stakes in US stocks
With his investment company Grantham, Mayo & van Otterloo (GMO), however, he invests in shares in companies that the eternal warner seems to believe will continue to exist. In the second quarter of 2023, the asset manager held 769 positions worth $21.6 billion, according to GMO’s 13F form. Institutional investors whose assets under management exceed $100 million are required to report their holdings to the US Securities and Exchange Commission (SEC) on a quarterly basis. Recently at the forefront: UnitedHealth, Meta Platforms and Microsoft.
First ETF filed with SEC
Beyond its proprietary investments, the wealth manager Grantham co-founded is now expanding its product portfolio, according to a filing with the SEC. With the GMO US Quality ETF, Grantham & Co. want to offer their own exchange-traded fund that is primarily invested in US stocks. The ETF is actively managed, meaning its “quality” stocks are handpicked by GMO’s equity head, Thomas Hancock, and portfolio managers Ty Cobb and Anthony Hene. “GMO believes that a high quality company is generally one that has an established business that offers a high level of return on prior investments and that has cash flows for investments with the potential for a high return on investment or for the return of cash to shareholders through dividends, share buybacks, or other mechanisms,” according to the filing with the Securities and Exchange Commission.
Participation in derivatives and ETFs conceivable
The quality ETF is intended to trade under the ticker “QLTY” for “Quality” in line with its investment theme. In addition, exposure to exchange-traded and over-the-counter derivatives and ETFs is also a possibility, according to the document. An investment in the GMO US Treasury Fund is also possible. The investment fund, launched in 2009, currently has a volume of 432 million US dollars, as can be seen on the asset manager’s website. As an investment target, GMO lists securities “secured or guaranteed, expressly and implicitly, by the unqualified credit quality of the US government.”
GMO must meet demand for ETFs
“GMO has always strived to offer innovative investment solutions in the structures that best suit our clients,” a spokesman for GMO told the Financial Times about the application for the company’s first ETF. “Our expansion into exchange-traded funds is a natural evolution of this exposure, driven by demand from intermediaries and wealth managers.”
According to the “Bloomberg” news agency, GMO is thus giving in to the high demand from the intermediary and asset management sectors and is doing the same as other asset managers who have launched ETFs in recent years.
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