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| Quarter | Letter Date | Fund Name | QTD | YTD | Tickers | Themes | Quick Take |
|---|---|---|---|---|---|---|---|
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"GMO's market-neutral Equity Dislocation Strategy returned 9.05% net in H1 2026 by exploiting extreme Value-Growth dislocations through superior stock selection and active rotation. Korean growth names delivered 4.0% returns while banks and software shorts contributed meaningfully."
GMO's Equity Dislocation Strategy delivered a 9.05% net return in H1 2026, significantly outperforming the 1.3% return of the value-growth spread proxy. The strategy's success was driven by strong stock selection and active rotation rather than broad value factor exposure. In Q1, markets showed concern over AI capital investment scale and geopolitical tensions, with Value outperforming Growth by 8.8% and the strategy returning 9.95% net. Q2 saw a reversal as optimism returned and Growth outperformed by 9.2%, but excellent stock selection, particularly in Korea, limited losses to just 0.82% net. Key contributors included Korean growth names like Samsung Electronics, SK Square, and LG Electronics, which added 4.0% to returns. Banks contributed 1.2% after stellar 2025 performance, though exposure was reduced following the rally. Software positions benefited from the SaaSpocalypse collapse, contributing 1.4%. The strategy demonstrated its ability to profit from AI disruption by targeting unsustainable valuations, with both long and short books generating alpha. Dynamic rotation, exemplified by Expedia adding nearly 2% through multiple position changes, remains central to the strategy's approach. With Value only modestly outperforming Growth year-to-date, significant opportunity remains.
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