Protective Asset Allocation
Protective Asset Allocation (Keller & Keuning 2016): rank a 12-asset risky universe by SMA(12) momentum (price / 13-month SMA), apply the absolute-momentum filter, and hold the top 6 qualifying tickers equal-weighted. The bond fraction ``BF = max(0, (12 - n_selected) / (12 - 6))`` scales the risky sleeve down and lifts the rest into IEF on each rerank date, where ``n_selected`` is the count of risky tickers whose SMA(12) momentum is positive. With protection_level=2, the buffer saturates to 100% IEF once fewer than 6 risky tickers qualify.
- Type: Tactical
- Frequency: monthly
- Asset classes: US Equity, International Equity, Emerging Markets, Treasuries, Bonds, Credit, Commodities, Gold, REITs
- Backtest window: 2002-07-26 to 2026-08-06
- 1Y
- 21.9%
- 3Y
- 46.3%
- CAGR
- 7.2%
- Max DD
- -13.9%
- Sharpe
- 0.34
Methodology
- On each month-end, score every ticker in the 12-asset risky universe by SMA(12) momentum (price / 13-month SMA).
- Hold the top 6 risky tickers whose momentum is positive, equal-weighted.
- Compute BF = max(0, (12 - n) / (12 - 6)) where n is the count of risky tickers with positive momentum, and allocate BF of the sleeve to IEF.
- When fewer than 6 risky tickers qualify, BF saturates at 1.0 and the sleeve rotates fully into IEF.
Source: Keller, W.J. Protective Asset Allocation (PAA)
Headline backtest performance as of 2026-08-06.