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GMO, founded by veteran value investor Jeremy Grantham builds investment strategies on the premise that all asset classes eventually revert to their historical means.

Co-head of asset allocation John Thorndike says investors don’t need to “hide out,” but should avoid the most expensive parts of the global market.

Last week’s action in stocks illustrated investor worries about high valuations. Those worries are reasons for restraint, a fund manager told Investopedia, but not alarm.

“High valuations offer both lower expected returns and higher risk than fairly valued or cheap markets,” said John Thorndike, a portfolio manager at GMO, in an interview with Investopedia. “Although valuation is not a great short-term predictor of market moves, it’s no surprise that an expensive market can decline with the slightest whiff of investor concern.”

One way to deal with valuation anxiety, and the growing chorus of investment professionals warning of a potential market pullback, is to invest away from richly priced stocks. The GMO Dynamic Allocation ETF (GMOD), an actively-managed strategy that shifts into asset classes that present relatively higher returns as suggested by their valuations, aims to make that easier.

The October-launched fund is the latest from GMO, co-founded by veteran value investor Jeremy Grantham, who predicted both the Dotcom crash and the 2008 financial crisis. Grantham’s investment wisdom—that all asset classes eventually revert to their historical means—underpins the strategy through the firm’s asset class forecasts, which projects potential real returns over a seven-year horizon.

For example, U.S. large- and small-cap stocks were projected to deliver negative returns as of the end of September.That explains the fund’s underweighting in U.S. stocks.

The way an investor divides their investments across assets—stocks, bond, commodities, alternatives and cash—largely determines results. The default is a 60/40 portfolio, though different versions of that allocation can work better in some periods over others.

Thorndike, who manages the fund with Ben Inker, says the fund has about 60% of its assets parked in stocks and 40% in bonds. Right now, it’s biased toward quality and value stocks, both in U.S. and non-U.S. stocks, and overweight Japan, emerging markets excluding China, and intermediate-term bonds.

An edited transcript of Investopedia’s interview with Thorndike follows.

Q: What is GMO’s view of the market now?

Thorndike: This [market] isn’t like 2007, or 2008 when everything was expensive and you needed to hide out in the safest assets. Today, you just need to avoid the most expensive part of the market, but otherwise can be fully invested.