Lucky sevens? Not so fast. Asset manager GMO's seven-year forecast doesn't show investors having much luck over that span, much less big returns. The Boston-based value shop, which oversees about $112 billion, doesn't like the broad U.S. stock market, which it maintains is too reliant on expanding price-earnings ratios, and it doesn't see great things ahead for bonds, either, given how low interest rates are. Two of the brighter spots, in its view, are high-quality stocks in the U.S. and emerging-market equities. For insight into the firm's views, Barron's spoke recently with Ben Inker, co-head of asset allocation at GMO, where he's worked for 21 years. The 43-year-old investment pro and his colleagues believe that assets' returns eventually revert to their mean, and they insist that will be the case for U.S. stocks, which have enjoyed big gains in recent years. The GMO Benchmark-Free Allocation Fund III (ticker: GBMFX), whose minimum investment is $10 million, has a 10-year annual return of 9.88%, besting 84% of its Morningstar peers. A much newer fund with an identical strategy—but just a $1,000 minimum—is Wells Fargo Absolute Return fund (WARAX).
Related previous post: GMO's 3Q 2013 Letter