The Protective Asset Allocation strategy was developed by Wouter Keller and JW Keuning.
It’s based off their paper Protective Asset Allocation (PAA): A Simple Momentum-Based Alternative for Term Deposits.
The strategy uses dual momentum to determine what assets to hold but has a very aggressive portfolio protection mechanism in case of a market crash.
Their goal was to make an “appealing alternative for a 1-year term deposit.”
Weight | Ticker | ETF Name | Sector | |
|---|---|---|---|---|
51% | IEF | iShares 7-10 Year Treasury Bond ETF | Bond, U.S., Intermediate-Term | |
6% | IWM | iShares Russell 2000 ETF | Equity, U.S., Small Cap | |
6% | QQQ | Invesco QQQ | Equity, U.S., Large Cap | |
5% | VNQ | Vanguard Real Estate Index Fund ETF | Real Estate, U.S. | |
5% | SPY | SPDR S&P 500 ETF | Equity, U.S., Large Cap | |
5% | VGK | Vanguard FTSE Europe ETF | Equity, Europe, Large Cap | |
5% | EEM | iShares MSCI Emerging Markets ETF | Equity, Emerging Markets, Large Cap | |
4% | EWJ | iShares MSCI Japan ETF | Equity, Japan, Large Cap | |
3% | DBC | Invesco DB Commodity Index Tracking Fund | Commodity, Diversified | |
3% | TLT | iShares 20+ Year Treasury Bond ETF | Bond, U.S., Long-Term | |
3% | GLD | SPDR Gold Trust | Commodity, Gold | |
2% | HYG | iShares iBoxx $ High Yield Corporate Bond ETF | Bond, U.S., Intermediate-Term | |
2% | LQD | iShares iBoxx $ Investment Grade Corporate Bond ETF | Bond, U.S., All-Term |
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Low | Average | High | |
|---|---|---|---|
1-Year | -18.2% | 12.6% | 57.1% |
3-Year | 0.8% | 12.9% | 33% |
5-Year | 3.3% | 13.1% | 29.4% |
10-Year | 4.6% | 13.3% | 23.4% |
Portfolio | 60/40 | S&P 500 | |
|---|---|---|---|
Annual Return | 12.1% | 9.3% | 10.3% |
10Y Annual Return | 4.8% | 7.9% | 12.2% |
Sharpe Ratio | 0.88 | 0.51 | 0.43 |
Max Drawdown | -18.2% | -29.7% | -50.97% |
Volatility (annualized) | 8.3% | 9.9% | 15.4% |
Dot Com Annual Return | 7.7% | -4.2% | -14.60% |
Great Financial Crisis Annual Return | 10.6% | -0.3% | -5.66% |
Positive Periods | 70.0% | 65.8% | 63.3% |
**S&P 500 backtest to 1972 and 60/40 backtest to 1970
