Jeremy Grantham has spent decades telling the world capitalism is a broken casino and that markets are always five minutes from hell. Fine. Plenty of that is true. But behind the gloomy TED-talk quotes and climate think-tank grants sits a money shop in Boston – Grantham Mayo Van Otterloo & Co – that has bled assets, sacked staff, stumbled through legal messes and now parks client cash in one of the dirtiest engine makers on the planet: Cummins.

GMO sells itself as the smart, contrarian grown-up – the one that spots bubbles early, shuns fads and takes the moral high ground on climate. Look at the numbers and the holdings and it starts to look less like principled contrarianism and more like a value shop that sat out one of the longest bull markets in history, then quietly bought into a serial emissions cheat while the founder told everyone else to mind the carbon.

This is not a neutral profile. This is a simple question. If you really believe the system is an out-of-control beast, why are you feeding it Cummins stock.

The Great Asset Drain – When The Prophet Misses The Rally

Go back a decade. Around 2014, GMO was running roughly $120 billion-plus in client money. By late 2016 that pile had shrunk by tens of billions of dollars as investors walked away. Reports at the time had assets down by about a third in just a few years, with more than $40 billion yanked since 2014 as performance lagged.

The core problem was simple. US equities ripped higher after the financial crisis; Grantham spent years insisting they were wildly overvalued and refused to chase. He was early calling the tech bubble in 2000 and the housing madness in 2007; by the mid-2010s he was early, loud and, for a long stretch, wrong. GMO’s value strategies looked “out of step” again, only this time clients had less patience.

2016 brought the usual euphemism – “right-sizing”. In plain English, they cut about 10 percent of staff as assets shrank. In 2017 they went further and killed off an entire 10-person international active equity team, shunting roughly $1.5 billion of assets elsewhere after that sleeve’s AUM almost halved over three years. Firm-wide assets were reported around the mid-$70 billion mark – down by roughly a third from the peak.

None of this is illegal. It is just the cost of sticking to a view while the market steamrollers you. The branding calls it discipline. The flow data call it what it is – clients deciding they were sick of paying hedge-fund fees for permanent doomsday positioning.

Portable Alpha, Dutch Anger And Emerging-Market Drama

When GMO does show up in headlines, it is not always for the reason you want your asset manager there.

In 2012 the Dutch transport pension fund Pensioenfonds Vervoer sued Goldman Sachs over a €250 million loss on a complex “portable alpha” structure stuffed with hedge funds and exotic credit. GMO was one of the external managers in the mix. Vervoer called the whole thing “wholly unsuitable” for a pension fund; Goldman denied wrongdoing. GMO was not the one in the dock, but it had been part of the risk plumbing behind a portfolio that blew up exactly the way you would expect a structured yield product to blow up in 2008.

Fast-forward to 2020 and GMO is not the one being sued – it is suing. Its emerging-market debt funds helped front a legal challenge against Ecuador’s $17-plus billion bond restructuring, alleging the government had misled investors and discriminated against holdouts in its tender offer. Again, nothing unlawful about a creditor enforcing its rights. But it underlines what GMO actually is beneath the climate essays and value manifestos – a shop that will happily pile into high-beta sovereign paper when it thinks the risk is mispriced, then drag a state into court when it thinks the restructuring terms stink.

Strip away the marketing and you are left with a fairly standard picture: a manager that has engineered clever structures that went sideways, fought with counterparties in court and lived through more than one patch where its “we know better” stance blew a crater in performance.

Grantham’s Gospel – Capitalism Is A Beast, But The Fees Clear Monthly

To be fair, Jeremy Grantham does not mince words about the system that made him rich. In a 2019 interview he described capitalism as an “out of control beast” with no social conscience, shredding the old post-war deal between companies and workers as CEO pay rockets and long-term investment gets sacrificed for quarterly numbers.

Through GMO research pieces and the Grantham Foundation he has pushed a hardcore line on climate risk and environmental damage. Recent essays talk about “rising toxicity” – chemicals, pollution and microplastics – as an existential threat to both capitalism and life, linking falling fertility and a looming population bust to environmental poisons rather than just lifestyle choices. CNBC dutifully reported his warning that, on current trends, having children may increasingly become “a luxury good” as the health impacts of toxicity mount.

You can agree with much of this and still see the dissonance. On Tuesday, Grantham tells the world that corporate greed and externalised environmental damage are ripping the social fabric to shreds. On Wednesday, GMO’s equity desk signs off another quarter owning a chunk of Cummins – an engine manufacturer fresh from the largest Clean Air Act penalty in US history. On Thursday, the marketing team pushes ESG-branded strategies.

The rhetoric is radical. The portfolio looks depressingly familiar.

The Cummins Stake – Climate Sermons, Diesel Dividends

Drill into recent 13F trackers and you find Cummins Inc sat comfortably in GMO’s portfolio. Public filing analysis puts the position at a little over 100,000 shares as of the third quarter of 2025 – a mid eight-figure dollar stake, depending on where the stock is trading. It is not a controlling interest, not even close. But it is a clear, deliberate bet on a company whose business model runs on combustion and whose legal history now includes being fined for literally cheating emissions tests.

Cummins’ deal with US and Californian regulators, finalised in early 2024, is brutal reading. The company agreed to a record $1.675 billion civil penalty – the largest ever under the Clean Air Act – for installing defeat devices on hundreds of thousands of Ram diesel pickups sold between 2013 and 2019. The software let the trucks pass lab tests then spew illegal levels of nitrogen oxides on the road.

On top of that, regulators flagged additional auxiliary emission controls on more recent models that increased pollution beyond legal limits, forcing a recall and remediation programme that will cost Cummins more than $325 million. In total, the enforcement action covers more than 600,000 vehicles, with knock-on health impacts falling, as usual, heaviest on the communities living and working next to busy roads.

None of this is hidden. EPA, DOJ and CARB have put out long pressers. Analysts have written it up as “Dieselgate 2.0” – the heavy-duty truck sequel to Volkswagen’s original scandal. Yet while Grantham’s essays warn that pollution-driven toxicity is literally undermining human fertility and capitalism itself, his firm continues to collect its slice of Cummins’ future cash flows.

You can call that nuance if you like. From the outside it smells like classic finance hypocrisy – one hand writing furious letters about environmental collapse, the other hand quietly clipping dividends from a company dragged into court for making the air worse on purpose.

Underperformance Wrapped In Virtue Language

GMO loves to frame its long stretches of underperformance as the price of moral and intellectual courage. They are the patient value investor, the one who refuses to buy the bubble or enable the madness. There is some truth in that. Someone did need to shout about the housing market in 2007 and the silly season in late-cycle US equities.

But the record also shows:

Assets plunging by roughly a third when markets decided Grantham’s bear brain had gone too far off-piste.
Cost cuts and team closures that followed those outflows.
Complex structures and high-risk sovereign bets that landed everyone in court the moment they blew up or were restructured on harsh terms.
And now, an equity book that happily holds a polluter with a $1.675 billion environmental penalty while the house philosopher writes about toxicity and civilisational risk.

This is not some boutique purity shop suffering for principle. It is a mainstream institutional manager, with mainstream contradictions, wrapped in better language and gloomier macro charts than most.

Why It Matters For Cummins – And Everyone Else On The Cap Table

From a Cummins point of view, GMO is just another shareholder. But this is exactly the point of the Shareholder Spotlight series. When asset managers who shout loudest about climate risk are still prepared to own your stock after you are nailed for industrial-scale emissions cheating, it sends a signal.

It tells Cummins’ board that, for all the noise, a big enough cashflow stream can still buy forgiveness from the very people who claim to be stewards of a livable future. It tells every other investor in the cap table that “ESG integration” often means nothing more than writing a slightly cross memo, tweaking a model and carrying on.

GMO is not uniquely evil. It is just typical – which is exactly the problem.

Lee Thompson – Founder, The Cummins Accountability Project

Shareholder Spotlight : GMO – Bubble Sermons, Bleeding Clients, And A Quiet Stake In Cummins