The Defensive Asset Allocation strategy was developed by Wouter Keller and JW Keuning.
It is based off their paper:
Breadth Momentum and the Canary Universe: Defensive Asset Allocation (DAA)
The strategy uses a momentum approach that is heavily weighted towards more recent months.
It also uses a system the authors call “breadth momentum” to determine how much to shift to defensive positions.
The strategy, on average, allocates 43% to equities, 40% to bonds, and 17% to REITs, Gold, and Commodities.
Weight | Ticker | ETF Name | Sector | |
|---|---|---|---|---|
13% | BIL | SPDR Blmbg Barclays 1-3 Month T-Bill ETF | Bond, U.S., Ultra Short-Term | |
9% | LQD | iShares iBoxx $ Investment Grade Corporate Bond ETF | Bond, U.S., All-Term | |
8% | EEM | iShares MSCI Emerging Markets ETF | Equity, Emerging Markets, Large Cap | |
8% | IEF | iShares 7-10 Year Treasury Bond ETF | Bond, U.S., Intermediate-Term | |
8% | QQQ | Invesco QQQ | Equity, U.S., Large Cap | |
7% | IWM | iShares Russell 2000 ETF | Equity, U.S., Small Cap | |
7% | VGK | Vanguard FTSE Europe ETF | Equity, Europe, Large Cap | |
7% | VNQ | Vanguard Real Estate Index Fund ETF | Real Estate, U.S. | |
7% | SPY | SPDR S&P 500 ETF | Equity, U.S., Large Cap | |
6% | EWJ | iShares MSCI Japan ETF | Equity, Japan, Large Cap | |
6% | TLT | iShares 20+ Year Treasury Bond ETF | Bond, U.S., Long-Term | |
5% | DBC | Invesco DB Commodity Index Tracking Fund | Commodity, Diversified | |
5% | GLD | SPDR Gold Trust | Commodity, Gold | |
4% | HYG | iShares iBoxx $ High Yield Corporate Bond ETF | Bond, U.S., Intermediate-Term |
The strategy has three main categories:
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Low | Average | High | |
|---|---|---|---|
1-Year | -11.9% | 14.4% | 57.6% |
3-Year | 1.4% | 14.4% | 30.7% |
5-Year | 3.1% | 14.4% | 27.3% |
10-Year | 4.6% | 14.5% | 24.9% |
Portfolio | 60/40 | S&P 500 | |
|---|---|---|---|
Annual Return | 13.8% | 9.3% | 10.3% |
10Y Annual Return | 4.8% | 7.9% | 12.2% |
Sharpe Ratio | 0.99 | 0.51 | 0.43 |
Max Drawdown | -16.6% | -29.7% | -50.97% |
Volatility (annualized) | 9.1% | 9.9% | 15.4% |
Dot Com Annual Return | 2.3% | -4.2% | -14.60% |
Great Financial Crisis Annual Return | 13.8% | -0.3% | -5.66% |
Positive Periods | 70.2% | 65.8% | 63.3% |
**S&P 500 backtest to 1972 and 60/40 backtest to 1970
