GTAA Agg3

GTAA Agg3 is the concentrated three-slot version of Meb Faber's Global Tactical Asset Allocation, drawn from the paper that did more than any other to put tactical asset allocation in front of ordinary investors. Each month it ranks thirteen global asset classes - US value and momentum equities, small caps, international and emerging market stocks, Treasuries across the curve, corporate and international bonds, commodities, gold, and real estate - by the plain average of their 1, 3, 6 and 12-month returns, then buys the top three at a third of the portfolio apiece. Each pick still has to clear one more hurdle: if it sits below its 10-month moving average, that slot goes to cash instead of the asset. Relative momentum does most of the work, since the strongest names in a broad basket are usually already trending higher, and the moving average acts as the brake for the times they are not. The price of holding only three slots is real concentration, and the portfolio can end up entirely in one category.

GTAA Agg3 uses no leverage. For more details, see A Quantitative Approach to Tactical Asset Allocation.