Fintech executive, writer, math geek, and investment systems developer. Founder and CEO of Altruist and Founder of FormulaFolios.

Best Tactical Asset Allocation (TAA) Performance of 2012

Best Tactical Asset Allocation (TAA) Performance of 2012

A blog reader recently asked about the Balanced Tactical Asset Allocation Model I publish here on the blog and how it stacks up to some other well known TAA models/funds out there.  To answer, I had to do a little recon to see just how we rank, and also to find out - what TAA model has done the best in 2012? For those not familiar with our TAA Model just click here to check out the static page that shows how it was built, what it's suggested for allocations, and how it's performed.


Let's dig in with some uber-geeky Tactical Asset Allocation research!

The first thing we need to do is find out who the real players are in Tactical Asset Allocation.  This style of money management has gained a lot of popularity in the past couple years, so there are actually quite a few websites, mutual funds, and ETFs we can research.  Here's my list of well-known funds that offer TAA:

  • Cambria Global Tactical Asset Allocation ETF (GTAA)

  • Northern Trust Global Tactical Asset Allocation Fund (BBALX)

  • Ivy Funds Ivy Asset Strategy Fund (WASAX)

  • USFS Tactical Asset Allocation Fund (USFSX)

  • Goldman Sachs Dynamic Asset Allocation Fund (GDAFX)

  • Meidell Tactical Advantage ETF (MATH)

In addition to mutual funds and ETFs that offer Tactical Asset Allocation, there's also a few popular websites/blogs (much like mine) that offer a TAA Model.  I've included just one below, as most do not have audited returns and/or do not freely publish their data so you can make sure it's the real deal (and not just soem hocus pokus, black magic, snake oil designed to dupe unsuspecting investors):

  • MarketSci TAA Model

Some of these funds/models have long track records, while others do not.  For this purpose of this post I'll attempt to answer the simple question "who's TAA Model is doing the best in 2012?"  7 months is clearly not an exhaustive time frame for analysis, but it should show that some strategies have done great this year, while others have struggled.  It should also point out that all TAA is not created the same (or equal).

I also wanted to measure up the TAA model I share on this blog.  Since the model I share here is "balanced" and the others are just for "growth" - I extrapolated the growth portion of our model.  In other words, our model usually allocates only 50% to growth investing, and 50% to income investing - but in this comparison I'm just measuring "growth vs. growth."

Now that I have the comparables, it's time to dig in and get the monthly returns for each of these strategies though the latest month end.  You can see those below:

[table id=10 /]

Since % tables can be a bit granular, here's what a visual looks like of these various TAA strategies:

Screen shot 2012-07-30 at 3.26.30 PM

Screen shot 2012-07-30 at 3.26.30 PM

You'll have to pardon my lack of focus on the aesthetics of the chart.  The purpose is simply to show a visual of the data, not necessarily win a graphic design contest.

The simple conclusion we can draw from this is that quite a few Tactical Asset Allocation portfolios are really struggling this year.  Considering the S&P 500 is up roughly 10% YTD (as of 7/30/2012) almost all of them are getting beat badly - by 5% or more in just 7 months.  But getting large returns isn't the usual calling card of TAA, managing risk is.

So let's take a look at who's performing the best on a risk adjusted basis (average return/deviation of returns):

  1. [blushing]

  2. Northern Trust

  3. Goldman Sachs

  4. MarketSci

  5. USFS

  6. Ivy Funds

  7. Cambria

  8. Meidell

I should note that when I did this study, I knew we'd done well for 2012 - but really had no idea how much better than the others.  Duly noted (for the second time), 7 months of data is hardly enough to make any investment decision over.

What's reassuring though is that in this short sample size the effectiveness of our research, on both pure returns and risk adjusted returns, is doing very well in 2012.  Although it's been a positive year for both stocks and bonds, there's been a lot of volatility - which seems to be effectively many of the other Tactical Asset Allocation strategies.

As part of my ongoing research on TAA, I'll continue to monitor all 8 strategies/funds and report on them via a leader board each month.  It should be fun, and beneficial for anyone seeking an alternative to the traditional buy and hold approach to investing.


Jason Wenk

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