Earlier this month, GMO led its quarterly letter with the provocatively titled “Don’t Act Like Stalin!,” penned by Ben Inker. Ah, I said to myself, remembering Alliance Bernstein’s white-paper headline, “The Silent Road to Serfdom: Why Passive Investing is Worse Than Marxism.” Another investment-management article haunted by the specter of Soviet ghosts.
This commentary, however, is solid. (I was less than impressed by Alliance Bernstein’s effort.) Of course, its teaser is rather silly. Acting like Stalin, it turns out, is not ignoring reports of German troops gathering on the Russian border. Nor is it chasing women (Stalin being quite the rake in his youth). Rather, it means tasking investment managers with beating inflation by an annualized 4.5 percentage points for the next 10 years, with failure being penalized by death.