MiB: Tom Hancock, GMO Focused Equity – The Big Picture

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This week, we speak with Tom Hancock, a partner at GMO LLC, where he is also head of the Focused Equity team. He manages the focused quality fund and its new Quality ETF, and is the portfolio manager for quality strategies. He previously served as co-head of the firm’s global equity team. Before joining GMO, he was a research scientist at Siemens and a software engineer at IBM.

Hancock is also portfolio manager for GMO’s Quality Strategies, including the Quality Fund MF (GQETX); that fund manages >8$ billion dollars and over the past 20 years, has returned 13.6% annually, significantly outperforming its benchmark (its minimum is 5 million). Over the past decade, it has been in the top 1% of peers; Morningstar has awarded it 5 Stars, and rated it “Gold.”

GMO, which is primarily an institutional fund, decided to make an ETF available to retail investors for the first time since its 1977 inception. The US Quality Equity ETF (QLTY is the symbol) is exclusively domestic (no overseas holding), with a concentrated set of holdings of 35 large-cap stocks. The active ETF charges 50 bps.

Exchange-traded funds are superior to Mutual funds in terms of avoiding unanticipated capital gains — MFs can distribute cap gains at any time, but cap gains only accrue to ETF owners when they sell them.

A list of his favorite books is here; A transcript of our conversation is available here Tuesday.

You can stream and download our full conversation, including any podcast extras, on Apple Podcasts, Spotify, YouTube, and Bloomberg. All of our earlier podcasts on your favorite pod hosts can be found here.

Be sure to check out our Masters in Business next week with David Einhorn, Greenlight Capital, a value-oriented hedge fund founded in January 1996. Since its inception, Greenlight has outperformed the S&P 500 by more than 300 basis points annually. He famously shorted Allied Capital and Lehman before its bankruptcy and was named one of Time magazine’s 100 most influential people in the world.