Global Tactical Asset Allocation - Agg. 6 by Meb Faber

The GTAA AGG 6 portfolio is the moderate-concentration variant in Meb Faber's aggressive Global Tactical Asset Allocation series, introduced in the 2013 update to his foundational paper A Quantitative Approach to Tactical Asset Allocation. It uses the same 13-asset universe and composite momentum scoring as GTAA AGG 3 but selects the top six ranked assets rather than three, providing a middle ground between the high concentration of AGG 3 and the full-universe diversification of GTAA 13.

Investment Philosophy

Each month, the strategy computes a composite momentum score for all 13 assets by averaging their trailing 1-, 3-, 6-, and 12-month returns. The top six receive equal allocations of one-sixth each. The same absolute momentum filter applies as in the rest of the GTAA series: any selected asset trading below its 10-month moving average is replaced with cash. By holding six of 13 assets, the portfolio captures a meaningful concentration advantage over a full equal-weight model while maintaining more diversification than the three-position AGG 3 approach.

Who It's For

This portfolio suits investors who want significant momentum exposure without the extreme single-asset concentration risk of GTAA AGG 3. It is appropriate for investors with a long time horizon and meaningful risk tolerance who want a systematic, evidence-based approach. Compared to AGG 3, it is better suited for investors who want to remain diversified across the assets they hold rather than betting entirely on the top three.

Pros

• Six-asset allocation captures strong momentum trends while distributing risk across more positions than AGG 3
• Absolute momentum filter avoids holding assets in clear downtrends
• Based on Meb Faber's published research with extensive historical backtesting

Cons

• Still relatively concentrated -- holding fewer than half of the 13-asset universe means significant exposure to whichever sectors dominate the momentum rankings
• Higher portfolio turnover than diversified buy-and-hold approaches
• Momentum strategies can lag in trendless, choppy, or rapidly reversing markets

Technical Notes

The 13-asset universe is identical to GTAA AGG 3: US and international equity subcategories, US and foreign government bonds, corporate bonds, commodities, gold, and US REITs. Composite momentum scores average the 1-, 3-, 6-, and 12-month returns. Assets below their 10-month simple moving average are replaced with cash. Rebalancing occurs monthly on the last trading day.