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Four money managers examine portfolio management strategies in the latest issue of The Wall Street Transcript, available at (212/952-7433) or http://www.twst.com/info/info567.htm

TWST: Could you give us a brief overview of Grantham, Mayo, Van Otterloo and your responsibilities there?

Mr. Hancock: Grantham, Mayo, Van Otterloo & Co. LLC is an independent money management firm. We’re a private partnership founded in 1977, with investment management being the firm’s only business. Of our 25 billion in assets under management, about 22 billion are in equities. And of that, 13 billion is in foreign stocks including both developed and emerging markets. My role at GMO, where I've been since 1995, is as Senior Portfolio Manager in charge of our quantitative developed market international equity portfolios. I manage a number of portfolios including the GMO International Small Companies Fund.

TWST: Getting down to basics, what are the advantages of investing in international small cap entities?

Mr. Hancock: There are two parts to that question: there’s the long-term strategic part and the short-term tactical part. Longer term, strategically, we believe the value is diversification. We still believe that non-US equities are significantly different because in the long run they behave with the economic cycles of their home markets. In the short run, investor sentiment rules, but in the long run, it’s fundamentals. And small stocks are particularly useful as a diversification tool because they tend to be more domestically oriented companies. The short-term advantage is that these stocks are simply cheaper. Pretty much the cheapest segment of world equity markets now is the non-US small cap stocks. Most everywhere else, stock markets are still trading at steep premiums to their normal valuation levels on p/e and other metrics. That’s not true of international small. The fundamentals are decent and the valuations are attractive. So that’s the one segment of the market where we think you can get a good equity return going forward for the next few years. A secondary advantage is the foreign currency exposure. US-based investors have benefited a lot from the strength of the dollar since 1995. That’s not something that you can count on going forward. The dollar looks dangerously overvalued on a number of measures. The current account deficit is rather frightening (it really requires foreigners to subsidize the US economy), and we predict that the foreign currencies are going to appreciate.

TWST: Could you tell us about some of the top holdings?

Mr. Hancock: The largest position in the portfolio right now is Pernod Ricard. Another name that we own that would be familiar in the US through their sporting goods franchise is adidas-Salomon (Other OTC:ADDDY.PK). It has attractive valuations and good business momentum. The excitement about the soccer World Cup can only help its business. Another sector of the market where we have a fair amount of broad exposure is utilities. Some of the other stocks that I’ve mentioned have been a little more cyclical. We’re kind of balanced, in terms of cyclicals versus defensive stocks. Utilities is one area where you can get a good margin of safety with comfortable dividend yields and low p/e ratios; you can balance the portfolio and not be too exposed to the possibility of falling back into a recessionary environment.

This special Investing Strategies Report includes:

1) Investing in Biomedical Technology Stocks - Michael P. Walsh, Founder and Managing Partner of Kilkenny Capital Management, LLC, examines portfolio management strategies in this timely and deeply informative 5,000-word interview from The Wall Street Transcript.

2) Investing in International Small Cap Stocks - Thomas Hancock, Partner with Grantham, Mayo, Van Otterloo & Co., LLC, examines portfolio management strategies in this timely and deeply informative 4,500-word interview from The Wall Street Transcript.

3)James P. O'Mealia, Managing Director and Senior Portfolio Manager at Fox Asset Management, examines portfolio management strategies in this timely and deeply informative 4,500-word interview from The Wall Street Transcript.

4) Eric J. Green, Senior Portfolio Manager, Director of Research and Principal at Penn Capital Management, examines portfolio management strategies in this timely and deeply informative 6,100-word interview from The Wall Street Transcript.