2/15/2024

InvestmentNews

Advyzon takes personalized portfolios further in new TAMP partnership

The wealth tech provider is teaming up with Nebo Wealth to create an automated end-to-end solution for RIAs. Advyzon, a wealth tech provider focused on independent financial advisors and RIAs, has unveiled a partnership to improve the process of building personalized investment portfolios. Compared to the typical approach of focusing on implementation – through custom indexing and tax management, for example – Nebo Wealth says it goes further with a "multi-period, shortfall optimization engine," which builds portfolios that are designed around clients’ financial goals.

Scott Hayward

GMO Chief Executive Officer

“The launch of Nebo marks an important next chapter in deepening our relationships with RIAs through investment-led solutions. In recent years we have expanded advisors’ access to GMO strategies by making more GMO funds available on custodial platforms. The introduction of Nebo’s novel approach will help advisors improve their clients’ financial well-being and achieve their financial goals.”

In the news

Billion Dollar Backstory

11/4/2024

Billion Dollar Backstory

Episode 75: How $75B Asset Manager GMO Sparked an Award-Winning Platform for Wealth Managers, Meet Dr. Martin Tarlie of Nebo Wealth

Dr. Martin Tarlie spent years at GMO, the iconic Boston asset manager, and now leads an award-winning investing platform, Nebo Wealth. In this episode, Martin and Stacy discuss: His backstory: from physicist/golf-performance product developer to SaaS founder How the physics mindset that followed him into the investment world turned into a novel investing approach The massive communication gap between asset managers and investors Why the fascination with the 60/40 allocation is misguided How Nebo is helping asset managers rethink risk so they can build better portfolios

Wealthmanagement.com

8/5/2024

Wealthmanagement.com

WealthManagement.com Celebrates Top Companies, Executives at 2024 Industry Awards

A record-breaking number of nominations were submitted in 2024, with over 1,000 entries received this year from more than 400 companies ... Nebo Wealth - TAMP and Portfolio Design Platform - WINNER

InvestmentNews

8/8/2024

InvestmentNews

Bondurant partners with Nebo Wealth to enhance client experiences

Under the newly unveiled partnership with GMO’s Nebo Wealth platform, BIA aims to more firmly embed the concept of mean reversion into its financial planning and portfolio management, enhancing its ability to provide comprehensive client service. By incorporating mean reversion, which suggests that stock returns eventually revert to their historical averages, Bondurant Investment Advisory seeks to offer clients more accurate financial plans and improved investment outcomes.

EIN Presswire

8/6/2024

EIN Presswire

EVO Wealth Consulting Launches Wealth Technology Solution Guide with 22 Industry Leaders

EVO Wealth Consulting (EVO), is proud to introduce the Wealth Technology Solution Guide, created in partnership with 22 leading wealth technology providers. This initiative aims to help financial advisors, Registered Investment Advisory (RIA) firms, and broker-dealers navigate the expanding landscape of wealth technology.

FA Mag

7/12/2024

FA Mag

The Risk Score Isn't Everything

Yet when it comes to financial planning and building a client’s portfolio, pretty much one component dominates everything: risk tolerance! Both the required rate of return and the time horizon are treated, at best, as poor distant cousins in the discussion or at worst banished like Harry Potter to a closet under the stairs. The complexities of the client’s life get boiled down to a single number: the dreaded risk score, which ends up being virtually the exclusive determinant of their asset allocation, and arguably one of their portfolio’s most important characteristics.

Bob Veres

6/25/2024

Bob Veres

Risk Tolerance Dysfunctions

In other words, the traditional risk tolerance instruments have, over time, effectively detached portfolio design decisions from the financial planning analytics, and reattached them to a process that I find simplistic and viscerally misleading in a number of ways. This trend away from a direct linkage between portfolio design and the financial plan was happening so slowly that somehow I missed it until (as the nebowealth white paper notes) it had become essentially mainstream in the planning profession.

Financial Planning

6/21/2024

Financial Planning

Has the risk score gained too much power?

Of all the numbers involved in financial planning, only one has the power to determine an investor's entire asset allocation: the risk score. But as this metric's influence has grown, some researchers and advisors say the reign of the risk score has gone too far.

FA Mag

6/18/2024

FA Mag

The Perils Of Outsourcing Asset Allocation To A Risk Score

For too long, the industry has been outsourcing asset allocation decisions to the risk score. This approach often results in portfolios that are disconnected from actual client goals and are unresponsive to changes in clients' financial situations. As a result, investors are not receiving truly personalized portfolios, leading to sub-optimal outcomes and the much bigger risk that clients don’t meet their goals.

Datos Insights

5/28/2024

Datos Insights

The Future of Goals-Based Investing

Thanks to the recent launch of new software applications, goals-based investing has the potential to transform the wealth management industry in the coming years. Although goals-based investing hasn’t received the sort of attention lavished on the latest industry fashions such as GenAI or direct indexing, the fact is that some of the most innovative developments in the industry―and potentially some of the most transformative―are happening in the area of goals-based investing.

Nexus Strategy

5/25/24

Nexus Strategy

Key Megatrends Shaping the Future of Wealth Management

As an industry, we may have become overly dependent on risk scores. Although these scores are a part of determining asset allocation, relying solely on them introduces several risks—no pun intended. This is what we call innovation, it's not always technology, it can be process innovation.

Wealthmanagement.com

5/20/2024

Wealthmanagement.com

Portfolio personalization platform Nebo Wealth came in second out of 11 companies that presented at Wealth Management EDGE.

WealthStack, the wealthtech pillar of the Wealth Management EDGE, held technology demonstrations during the annual conference this week at The Diplomat Beach Resort in Hollywood Beach, Fla.

Wealth Solutions Report

3/25/2024

Wealth Solutions Report

Industry Tech Experts Also Point To More Digital Platforms Offering Customization

They are developing solutions to achieve “personalization at scale – how to actually give everyone a unique portfolio, tailored to their goals and circumstances, not to the results of their risk tolerance questionnaire,” he said. One example of that, he said, is asset management firm GMO’s Nebo Wealth, a new platform designed to help registered investment advisors (RIAs) achieve portfolio personalization at scale.

Bob Veres - Inside Information

3/1/2024

Bob Veres - Inside Information

Goals-Based, Custom-Designed Portfolios

Synopsis: After reading about Nebo Wealth, you’re going to think the traditional portfolio design process is at best naive, at worst a bit silly. And Nebo Wealth also, somewhat incidentally, provides advisory firms with the holy grail of portfolio management: the ability to provide portfolios that are completely customized to a client’s individual situation—at the literal touch of a button.

ThinkAdvisor

2/28/2024

ThinkAdvisor

First Advyzon Conference Highlights Tech Updates and More

After 10 years in the wealthtech space, platform provider Advyzon just staged its first conference. The event, which took place last week in Phoenix, drew a sell-out crowd ... Also making a major product announcement at the conference was Nebo Wealth, GMO’s technology-driven asset management platform. Nebo Wealth says its technology allows RIAs to streamline and automate the process of delivering personalized portfolios at scale.

InvestmentNews

2/15/2024

InvestmentNews

Advyzon takes personalized portfolios further in new TAMP partnership

The wealth tech provider is teaming up with Nebo Wealth to create an automated end-to-end solution for RIAs. Advyzon, a wealth tech provider focused on independent financial advisors and RIAs, has unveiled a partnership to improve the process of building personalized investment portfolios. Compared to the typical approach of focusing on implementation – through custom indexing and tax management, for example – Nebo Wealth says it goes further with a \"multi-period, shortfall optimization engine,\" which builds portfolios that are designed around clients’ financial goals.

Business Wire

2/15/2024

Business Wire

Advyzon Investment Management (AIM) Partners with Nebo Wealth to Create Turnkey, End-to-End Solution

Advyzon Investment Management (AIM), a turnkey asset management program (TAMP) under the umbrella of comprehensive technology platform Advyzon, recently announced a partnership with Nebo Wealth, an award-winning asset allocation and portfolio design platform from global asset manager Grantham, Mayo, Van Otterloo & Co., LLC (GMO). AIM now powers and serves as a turnkey platform for Nebo Wealth, an end-to-end solution that enables Registered Investment Advisors (RIAs) to streamline and automate the process of delivering personalized portfolios for each and every client at scale.

Think Advisor

1/31/2024

Think Advisor

20 Years In, T3 Remains an Emerging Tech Barometer

This year T3 leaned into personalization: how advisors can overcome the tradeoffs inherent in customizing their services, while gaining scale via a variety of new technologies. A prime example of this movement was the launch at T3 of Nebo Wealth, from GMO, the investment management firm founded by Jeremy Grantham. "Nebo Wealth is a turnkey, end-to-end platform that enables RIAs to streamline and automate the process of delivering personalized portfolios for each and every client at scale," said Martin Tarlie, product lead for the needs-based optimization platform.

WealthManagement.com

1/22/2024

WealthManagement.com

GMO Launches Nebo Wealth at T3

This week, the firm has introduced its new platform, Nebo Wealth, an end-to-end platform that its growing customer base of RIAs have been asking for, according to product lead Martin Tarlie. The new platform is meant to help advisors achieve portfolio personalization at scale, and bridge an industry gap between financial planning and asset allocation. If anything, Tarlie said the new platform could disrupt the model marketplace space; it can replace the spreadsheets that too many advisors rely on, as well as off-the-shelf models.

PRNewswire

1/22/2024

PRNewswire

Nebo Launches "Nebo Wealth" - A Turnkey Asset Allocation and Portfolio Design Platform

Nebo, the award-winning asset allocation and portfolio design platform from the global asset manager Grantham, Mayo, Van Otterloo & Co, LLC (GMO), announced today the launch of Nebo Wealth – a turnkey, end-to-end platform that enables Registered Investment Advisors (RIAs) to streamline and automate the process of delivering personalized portfolios for each and every client at scale.

FundFire

12/4/2023

FundFire

Former BlackRock, Principal Exec Launches Consultancy

Casciano also has an agreement with Grantham, Mayo, Van Otterloo & Co.’s "Nebo" platform, which the Boston-based asset manager launched last year. The platform automates portfolio construction processes associated with customized model portfolios for RIAs. "As the industry is increasingly pushing back on risk scores and model portfolios as cookie-cutter, there is a growing need for better technology and behavioral finance-based approaches to be able to truly design and deliver personalized portfolios," said Tim Welsh, president of Nexus Strategies, which counts Nebo as a client.

WealthManagement.com

10/12/2023

WealthManagement.com

Wealth Management Industry Awards: On the Red Carpet with Martin Tarlie (Video)

Industry Awards. Listen as Martin Tarlie, Director, Product Lead, GMO, discusses how their 2023 Wealthies Initiatives help financial advisors.

Financial-Planning.com

09/12/2023

Financial-Planning.com

The 'megatrends' defining the future of investing, per the CFA Institute

"We think the future of financial advising is aligning the plan with the portfolio. Today, most assets are outsourced into cookie-cutter portfolios where risk is based on volatility and untethered from the financial plan. Consequently, advisors lack confidence that their clients are in the right portfolios," Finnegan said. "In the future, we think all advisors will be building one-of-a-kind portfolios for every client, featuring a custom asset allocation designed to meet their specific goals."

Informa

09/07/2023

Informa

Nebo Wins Best Goals-Based Investing Platform at WealthManagement.com Industry Awards in NYC

The new Goals-based Investing Platforms category is a reflection of how asset managers are currently investing to provide new tools and technology for advisors to better tailor recommendations and implement financial planning themes into their investment management services. A record-breaking number of nominations were submitted this year - over 1,000 entries were received from more than 400 companies. ultimately honoring 80 companies and executives in the wealth management space.

BusinessWire

09/07/2023

BusinessWire

GMO's Nebo Surpasses $1Billion in Platform Assets One Year After Launch

Grantham, Mayo, Van Otterloo & Co. LLC (GMO), a global investment manager, announced today a major milestone for its Portfolio Design platform Nebo, which has surpassed $1 billion in platform assets 1 one year since its September 2022 launch. “Nebo is revolutionary for private wealth management, along the lines of Direct Indexing from a personalization perspective." Nebo (for Needs-Based Optimization) is a continuation of GMO’s history of research and innovation in areas including asset allocation, quality investing, and quantitative strategies. Nebo is not just a portfolio construction engine, it is a paradigm shift in risk assessment, redefining risk as ‘not having what you need, when you need it.' Nebo uses a proprietary multi-period shortfall optimization – built on a decade of deep research and user-led development – to generate personalized client portfolios that seek to minimize shortfall risk and align to each client's financial plan.

Cerulli

07/25/2023

Cerulli

U.S. Managed Accounts 2023: Strengthen and Scale Advisory Solutions

As more and more advisors make the transition to financial planning, new wealth technology providers have emerged to help streamline the process. One of these offerings that bears watching is Nebo, from GMO Asset Management. This offering seeks to bridge the gap between the creation of the financial plan, and the actual implementation of the plan via an investment portfolio. Cerulli believes this offering can help advisors with a traditional pain point in their business, while giving them more time to focus on building and maintaining client relationships and making sure those clients achieve their financial goals.

Corey Hoffstein: Podcast

08/07/2023

Corey Hoffstein: Podcast

S6E13: Bridging the Gap Between Financial Planning and Portfolio Management

In this episode I speak with Martin Tarlie, a member of the Asset Allocation team at GMO and spearheading their work on Nebo, a goals-based investment platform. Martin describes Nebo as, "bridging the gap between financial planning and portfolio management," with a key innovation being the reformulation of risk from volatility to not having what you want/need when you want/need it. In other words, constraints on both wealth target and horizon.

NAPFA Advisor

06/15/2023

NAPFA Advisor

Are Financial Planners Stuck in the 1970s?

Standard financial industry practice builds retirement portfolios using mean-variance optimization and validates them using Monte Carlo simulations that assume asset returns are a random walk. To put a finer, more brutal point on it, managers construct portfolios using technology from 1952 and then have the temerity to check the results using assumptions from 1970. We suggest a more modern portfolio construction approach that puts the key problem of having sufficient assets to support investors’ required spending in retirement front and center.

Think Advisor

06/08/2023

Think Advisor

The Trends Innovative Advisors Are Talking About

Practice Management: Building Your Business: Investment manager Grantham, Mayo, Van Otterloo & Co. (GMO) stood out with its new portfolio construction and asset management platform, Nebo, which "bridges the gap between the plan and the portfolio by redefining risk as not volatility, but rather, not having what you need when you need it," said Martin Tarlie, product lead for Nebo.

Morningstar

04/26/2023

Morningstar

Morningstar Investment Conference: Fintech Showcase

The Fintech Showcase features emerging financial technology companies in wealth, digital finance and asset management reshaping the rules of engagement in our industry. All are vying for the Best of Show Award and for the grand prize: lunch with Kunal Kapoor, CEO of Morningstar. The showcasing companies are: Alphathena | Income Lab | Income Conductor | nebo | Pebble Finance | Responsive AI |

Wealth Management

04/07/2023

Wealth Management

The WealthStack Podcast: 5 Trends Shaping Wealth Management in 2023

GMO has launched a new product called Nebo, Needs-Based Optimization, and what that does is bridges the gap between the financial plan and portfolio construction. They've got some amazing analytics, algorithm approach, a little behavioral finance sprinkled on top, to make it a really compelling way to integrate what advisors do from a workflow point of view from taking the financial planning recommendations and then making that into the actual portfolio itself.

Bob Veres

04/02/2023

Bob Veres

bobveres.com - Inside Information - Nebo makes a splash at T3

The 2023 T3 attendees were witnessing the birth of a new fintech category ... advent of portfolio design software ... a missing ingredient at the heart of the tech stack. Nebo is a portfolio design engine that fills an important gap in the fintech space: the portfolio design toolkit that sits between planning and asset management ... colonizing exactly the missing patch of ground.

WealthManagement.com

03/10/2023

WealthManagement.com

Q&A: Joel Bruckenstein on What to Expect at T3

What are you excited about this year? There’s a relatively new company called Nebo, but it’s a technology that was developed by GMO, Jeremy Grantham’s firm. I don’t think most people have ever heard of it or have seen it. (Editor's note: Except for those who pay attention to the Wealthmanagement.com Industry Awards. Nebo won the 2022 award in the highly competitive Industry Disruptor category.)

Wealth Management

03/17/2023

Wealth Management

Takeaways From the 2023 T3 Conference

I first met Martin Tarlie, the product lead of Nebo by GMO, at our own WealthStack conference in 2022. He has spent the last 10 years at work on the ideas behind the platform, which he says can be thought of "as a startup within a mature asset management firm." Advisors still building their own portfolios or those interested in following the latest philosophical and methodological underpinnings, which are bringing behavioral finance into the process, should check out the resources Tarlie has created.

RIABiz

03/16/2023

RIABiz

The odd rhythms of T3 meant expectations got heaped on 'Schwabitade's' Tom Bradley, with modest delivery, but quietly Black Diamond, Altuist, TradePMR and something called Nebo landed punches

Nebo (Needs-based Optimization), a 2022 startup, was another example. It sees a void created by a risk-number mentality gone too far because it relies too much on real or perceived sleep-at-night fear factor around volatility, according to Martin Tarlie, product lead for Nebo, and a T3 newcomer. "We are a startup technology venture inside of an institutional asset management firm," he said.

withintelligence.com

02/09/2023

withintelligence.com

Private Asset Management Awards 2023: Best multi-asset class portfolio management system (Finalist)

We are excited to announce that the shortlist for the With Intelligence Private Asset Management Awards has been released! The quality of entries was of an incredibly high standard this year, and we would like to congratulate everyone who made the list! For over two decades, these Awards have provided a platform for top investment professionals, wealth advisors, legal firms, consultants, and other key service providers operating within the sector, to showcase the incredible achievements they have accomplished.

Advisor Perspectives

12/12/2022

Advisor Perspectives

GMO’s New Asset Management Platform

When I heard that the investment management firm GMO had created a retirement planning tool to mitigate “sequence of returns” risk I looked forward to learning about it. After setting aside a stumbling block or two in its white papers, I found it to be the best platform for financial advisors I have ever seen.

RIABiz

12/10/2022

RIABiz

MarketCounsel Summit convenes in Las Vegas with Goldman Sachs there to say: We are already really a $1-trillion custodian

Premium placement for exhibitors was just outside the main ballroom, with a few notable newcomers, including, Jeremy Grantham’s GMO asset management firm fresh off the launch of Nebo. Nebo (for Needs-Based Optimization) bridges the gap between financial planning and asset management. Nebo is built on the idea that clients' chief investment risk is not short-term market volatility, but rather not having the financial resources needed when needed.

Advisor Perspectives

10/28/2022

Advisor Perspectives

Nebo - GMO's New Asset Management Platform (Podcast)

The advisors who are listening to this podcast will start a financial-planning process with a risk assessment for a client. That exercise will evaluate how much volatility the client can tolerate. It will serve as input to constructing a portfolio that optimizes returns given a client’s risk tolerance.My guest today is here to explain why that is the wrong approach. The problem is not to minimize volatility, he says, but to figure out how much money a client needs, when they need it, and to solve for that problem.

ThinkAdvisor

10/10/2022

ThinkAdvisor

What to Make of the Industry's First 'Wealth Festival

Most notably, Jeremy Grantham’s GMO asset management firm did so with the launch of Nebo, a technology-driven asset allocation and portfolio management platform for RIAs that streamlines and automates the process for delivering custom and personalized portfolios. (Nebo stands for needs-based optimization). Nebo and other vendors had good traffic from advisors eager to learn and sample the latest innovations — while seeking shelter from the warm California sun.

Money Life with Chuck Jaffe

10/04/2022

Money Life with Chuck Jaffe

Sequence Risk, with Martin Tarlie of GMO (Podcast)

Martin Tarlie at GMO discusses the firm's research looking at how to properly deal with sequence-of-return risk, the condition many older investors are facing now as they look at retiring into a stock market that is struggling.

Mutual Fund Wire

09/14/2022

Mutual Fund Wire

14 Fund Firms Win Big in NYC

This year's 'Wealthies' winners were honored last Thursday at a 500-plus-attendee, black-tie awards gala in the Ziegfeld Ballroom in New York City, after roundtable discussions and networking at the InterContinental Times Square. GMO won the 'industry' disruptor award for its Nebo platform.

FundFire

09/13/2022

FundFire

GMO Launches Digital Portfolio Construction Platform for RIAs

GMO's approach can help clients that are at risk of having insufficient funds during retirement, said Tom O'Shea, a research director at Cerulli Associates, which does not work with GMO. O'Shea, however, said Nebo is the first tool that solves for the problem of a 'sequence of return risk 'within a personalized separately managed account.' Yes, you outsource this cumbersome problem to solve, but the main benefit is it helps you allow the client's money to last longer in retirement,' he said.

MarketWatch

09/13/2022

MarketWatch

These experts think retirees should time the market

Ben Inker, GMO's co-head of asset allocation, and asset allocation team members James Montier and Martin Tarlie, have just published a paper that is likely to ruffle plenty of feathers. 'Investing for Retirement III: Understanding and Dealing With Sequence Risk' argues that retirees can lower their risk of running out of money by including some market timing in their so-called 'glide path,' meaning the path by which their portfolio is expected to evolve as they move through retirement. Right now, the retirement industry's typical advice is that retirees should pretty much ignore temporary market conditions, and follow a predetermined optimal 'glide path' from risk to safety, stocks to bonds, as they age.

Advisor Perspectives

09/09/2022

Advisor Perspectives

Investing for Retirement III: Understanding and Dealing With Sequence Risk

Sequence of return risk is different from most other forms of risk borne by investors. It is not a risk inherent in an asset class, nor can it be seen in any portfolio analysis that looks at a single period of returns. As a result, it is not much of a surprise that sequence of return risk is entirely ignored in much of academic finance. But it is a meaningful risk for the vast majority of investment portfolios and there are useful tools that can mitigate its effects. We believe a portfolio construction framework that takes into account the lifespan of the portfolio and its expected cashflows can account for sequence of return risk better than any standard single-period optimization. And by dynamically reallocating portfolios in light of the returns assets have actually delivered and the consequent impact on their expected returns, portfolio managers can substantially further improve outcomes for their clients. Adopting these tools can be difficult, as both require combating natural human behavioral tendencies. But investors and their advisors would be well-served by at least understanding the ways those tendencies lead to sub-optimal longterm outcomes and determining whether it is worth some of the emotional pain involved in taking a different path.

Wealth Management

09/09/2022

Wealth Management

WealthManagement.com Recognizes Top Companies, Execs at 2022 Industry Awards

The eighth-annual event featured 105 awards presented to 84 companies and individuals from a pool of 225 finalists.WealthManagement.com celebrated the winners of the 2022 WealthManagement.com Industry Awards (the “Wealthies”) Thursday night during a black-tie awards gala at the Ziegfeld Ballroom in New York City.

Wealth Management

09/08/2022

Wealth Management

GMO Launches Portfolio Construction, Management Platform for RIAs

In development for almost a decade and with three years of early-adopter feedback and input from fiduciary financial advisors, the global investment manager GMO announced today the launch of what it calls Nebo, which is short for Needs-Based Optimization platform. Nebo was also a winner in the 'Industry Disruptor' category of the WealthManagement.com Industry Awards, the winners of which were announced Thursday.

Business Wire

09/08/2022

Business Wire

GMO Launches Nebo, an Innovative Asset Management Platform for RIAs

Nebo (for Needs-Based Optimization) bridges the gap between financial planning and asset management, helping advisors ensure clients have the financial resources they need to achieve their goals. Nebo is a new, technology-driven asset allocation and portfolio management platform for Registered Investment Advisors (RIAs) that streamlines and automates the process for delivering custom and personalized portfolios to their clients.

ThinkAdvisor

09/08/2022

ThinkAdvisor

Grantham's GMO Launches Platform to Streamline Client Portfolio Customization

Grantham, Mayo, Van Otterloo & Co. — the investment manager led by Jeremy Grantham — on Thursday introduced asset allocation and management technology to help RIAs provide personalized portfolios to their clients. The Nebo, or 'needs-based optimization,' platform automates and streamlines client portfolio customization, according to GMO. The firm based Nebo’s approach on the idea that clients’ main investment risk, rather than short-term market volatility, is lacking the financial resources they need, when they need them.

MarketWatch

07/08/2022

MarketWatch

Your retirement portfolio is fundamentally flawed: GMO

All across America, retirees and near-retirees are reeling. They were assured by simplistic “McMoney” financial advisers that bonds were “safe,” that bond returns were steady and predictable, and that a portfolio balancing stocks and bonds would be fine in all circumstances. And in the first half of this year they have discovered to their shock that none of these things is necessarily true. So it is timely that James Montier and Martin Tarlie, strategists at white shoe money management firm GMO, have produced a paper showing why these assumptions are wrong, why they may be endangering our retirement plans, and what we can do about it.

Guru Focus

07/07/2022

Guru Focus

GMO Commentary: Investing for Retirement II: Modelling Your Assets

Standard financial industry practice builds retirement portfolios using mean variance optimization and validates them using Monte Carlo simulations that assume asset returns are a random walk. To put a finer, more brutal, point on it, managers construct portfolios using anachronistic technology from 1952 and then have the temerity to check the results using assumptions from 1970. The unsurprising result of a process stuck over 50 years in the past is portfolios that burden future retirees with an unnecessarily high risk of financial ruin. As one of us points out relentlessly, risk isn't a number, rather it is a notion or a concept. In the past, we have talked about the permanent impairment of capital as being the true risk you want to avoid. We have also highlighted the three paths that can lead to this outcome: Valuation risk. Buying an asset that is expensive means that you are reliant upon

Morningstar

07/10/2019

Morningstar

The Long View: Montier: 'How Do I Get Paid for Owning This Asset?'

Amid a weak stretch for value strategies, the asset-allocation specialist discusses why GMO remains pessimistic in its outlook for U.S. stocks. Our guest on this week's installment of 'The Long View' podcast is James Montier. Montier is a member of the asset-allocation team at Grantham, Mayo, Van Otterloo & Co. Before joining GMO in 2009, he was co-head of global strategy at Societe Generale. A prolific and incisive writer, Montier has authored several books, including Behavioural Investing: A Practitioner's Guide to Applying Behavioural Finance; Value Investing: Tools and Techniques for Intelligent Investment; and The Little Book of Behavioral Investing. He's also a regular contributor to GMO's library of white papers and research studies on topics ranging from productivity, strategic asset allocation, contrarianism, and more. In addition to his duties at GMO, Montier is also a visiting fellow at the University of Durham and a fellow of the Royal Society of Arts.

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