GMO is a Boston asset manager co-founded in 1977 by Jeremy Grantham with Richard Mayo and Eyk Van Otterloo, known for valuation-driven dynamic asset allocation built on long-horizon mean reversion. Grantham is famous for calling historic bubbles, warning publicly ahead of both the 2000 dot-com crash and the 2008 financial crisis. Flagship publications include the GMO Quarterly Letter (now written by Asset Allocation co-heads Ben Inker and John Pease), Grantham's Viewpoints essays and the 7-Year Asset Class Forecast.
This report explains GMO’s strategy for buying high-quality local-currency bonds from emerging markets (like China or India). The idea: pick countries with low inflation, low deficits, and high savings to get higher returns than developed-market bonds, while keeping some safety. For regular investors, it means you don’t have to choose between risk and reward—you can blend both. Worth a read because it shows how focusing on “quality” can reduce volatility in emerging-market debt while still capturing growth.
A GMO research article examines investment strategies for emerging market (EM) local currency bonds, with the core argument being that constructing a quality-tilted EM local currency bond portfolio can capture the EM risk premium while retaining the defensive attributes of developed market (DM) bond
This section serves as the summary of the GMO research report, reiterating the core logic of the quality-tilted emerging market (EM) local currency bond strategy: capturing the EM risk premium while retaining the defensive attributes of developed market (DM) bonds. The author emphasizes that the full value of this strategy can only be realized through customized implementation in collaboration with clients.
The author argues that the defensive and return-capture characteristics of the EM quality bond strategy are key pieces in addressing the unique challenges faced by EM debt investors. This strategy can serve as a core EM debt exposure or be combined with additional return sources such as currency, interest rates, and security selection to provide an integrated, customized solution.