Grantham's GMO Ventures Into ETF Arena With Quality Stock Focus

Grantham Mayo Van Otterloo, the Boston-based investment giant with assets worth $59 billion, is making its debut in the booming $7.4 -trillion ETF sector.

The firm, co-established by Jeremy Grantham, submitted an application Monday to U.S. authorities for its inaugural ETF, named the GMO U.S. Quality ETF. This ETF, set to trade under the ticker QLTY, will concentrate on equities that GMO deems to be superior in quality.

The move by GMO into the ETF domain is a response to the increasing demand from intermediaries and wealth managers. The firm is now part of an expanding roster of asset managers that have ventured into the ETF space in the past few years.

With a staggering $7.4 trillion dispersed over 3,200 ETFs listed in the U.S., GMO might find it challenging to stand out in this crowded market. Moreover, approximately $58 billion is already invested in smart beta ETFs focusing on the quality factor, as per data from Bloomberg Intelligence.

Grantham Holds Bearish View On US Economy, Stock Market

Grantham, a co-founder of GMO, is renowned in Wall Street circles for his bearish outlooks. Despite the tech sector’s strong performance this year, Grantham remains cautious, emphasizing the potential negative impacts of escalating interest rates on the U.S. economy.

He recently remarked in a Bloomberg interview: "Personally I think AI is very important,” but quickly added, “But I think it’s perhaps too little too late to save us from a recession.”

Chart: Quality Stocks Outperform S&P 500 So Far In 2023

While many bearish investors have felt the pinch from the tech sector’s impressive rally this year, the quality factor strategy has proven its worth. For instance, the iShares MSCI USA Quality Factor ETF QUAL has seen a nearly 20% return in 2023, outpacing the SPDR S&P 500 ETF Trust SPY’s 15% ascent.

Nvidia Corp. NVDA is the QUAL ETF’s largest holding at 5.7%, followed by Visa Inc. V at 4.5%.

Distinct from index-following offerings like QUAL, GMO’s QLTY ETF will have active management. The team at the helm includes Thomas Hancock, Ty Cobb and Anthony Hene. Details regarding the fee structure are yet to be disclosed.

Read now: Wall Street Veteran Who Predicted The 2000 Tech Bubble, 2008 Subprime Crisis, Doubts Fed’s Ability To Sidestep Looming Recession

This content was partially produced with the help of AI tools and was reviewed and published by Benzinga editors.

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