Abstract
GMO offers a mutual fund which is free to change its composition of assets in accordance with expected risks and returns. It is called the GMO Benchmark Free Allocation Fund III, ticker: GBMFX. This study asks whether one could obtain the same performance by adjusting one’s holdings of Vanguard funds. We find that an investor was unable to reach the return of the GMO fund with either a continuously rebalanced portfolio of Vanguard funds or with a varying weight portfolio that matched the style of the GMO fund throughout the period. However, in the second half of the period since inception through June 2010, GBMFX had roughly the same return as the baskets of Vanguard funds.
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