Case | HBS Case Collection | January 2002 (Revised October 2007)

Grantham, Mayo, Van Otterloo & Co., 2001

by Joshua Musher and Andre F. Perold

Abstract

Asset manager GMO underperforms the market during the 1996-2000 stock market bubble because of the focus on absolute risk. After suffering significant client withdrawals, performance again shines when the bubble collapses. Did they win the battle only to lose the war? This case reviews the quantitative investment process developed by the firm to manage assets and the philosophy behind the models and the firm. Now that performance has recovered, the partners contemplate why so much business was lost. Should they temper further bets to retain more business, or does the fiduciary duty to the client necessarily entail the risk that some clients will leave?

Keywords: Customers; Asset Management; Stocks; Investment; Price Bubble; Mathematical Methods; Risk and Uncertainty;

Citation:

Musher, Joshua, and Andre F. Perold. "Grantham, Mayo, Van Otterloo & Co., 2001." Harvard Business School Case 202-049, January 2002. (Revised October 2007.)