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Asset Allocation

Systematic Tactical Asset Allocation

As monetary and fiscal policy are approaching an important pivot point due to rising inflation and change in the energy landscape, a renewed focus on systematic tactical allocation is gaining momentum.

Systematic tactical asset allocation strategies employ algorithms that take advantage of price action anomalies and market inefficiencies to determine the proper mix assets that maximize the Sharpe ratio while volatility remains low over the long-term. These are beta strategies because it is nearly impossible to outperform passive investing in the long-term while achieving a high Sharpe ratio. However, a suitable beta strategy has the potential of generating high risk-adjusted returns and leveraged alpha.

We have added a new signal service for Market Signals or All in One premium subscribers based on a systematic tactical allocation strategy that invests in stocks, bonds, gold and commodities via liquid ETFs. Performance backtests can be found here.

 

Below is performance of the strategy using indexes closely tracked by the ETFs. There is no leverage. Period of backtest is 01/03/1995 to11/02/2021.

Sharpe ratio of nearly 1.2 and volatility is 7.1%. These performance metrics offer potential for achieving high leveraged alpha. For leveraged performance details click here.

Note that the strategy operates in the monthly timeframe and if there are new signals, rebalancing occurs at the start of the month.

Going forwards, we plan to introduce up to two more strategies with different mix of assets.

 

Specific disclaimer: The risks of investing in equities, ETFs, or in equity derivatives, include total loss of capital. At times we may hold positions, long or short, calls or puts, in a number of ETFs.

Disclaimer: The systematic tactical asset allocation signals (Signals) are provided for informational purposes only and do not constitute investment advice. We do not warrant the accuracy, completeness, fitness or timeliness for any particular purposes of the Signals. Under no circumstances the Signals should be treated as financial advice. The author of this website is not a registered financial adviser. Before subscribing please read our Disclaimer and Terms and Conditions.

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