What is Tactical Asset Allocation (TAA) and how we implement it to improve our portfolio performance?
Tactical Asset Allocation (TAA) is an active portfolio management strategy which dynamically adjust asset allocation to take advantage of market anomalies. TAA seeks to improve absolute and risk adjusted performance compared to passive portfolio strategies like buy and hold or simple re-balancing (using static weights).
Our service uses quantitative investment models which identify exploitable asset or sub-asset opportunities and adjust the portfolio weights accordingly. We focus on sector rotation and market timing models, each model has is own purpose. The sector rotation model is designed to capitalize on risk adjusted momentum and trend consistency while the market timing model acts as risk on / risk off switch and its goal is to reduce portfolio risk by allocating to low risk assets (mainly treasuries) during bear (equity) market conditions. No model can predict the future and all models have inherent delay meaning that we cannot always respond actively to reduce risk that is reason why we also put emphasis on holding diversified low (or negative) correlated assets in our asset portfolio.