Classical Asset Allocation
Momentum picks, then mean-variance to a 10% volatility target.
Published versions of this model differ in the details. This implementation is still being checked against the original paper, so treat its numbers as provisional.
Holding now
Signal from Aug 2026 close- SPY46%
- DBC44%
- BIL5.5%
- EFA4.2%
- SPYS&P 50046.3%
- DBCCommodities44.0%
- BILT-Bills5.5%
- EFAIntl Developed (EAFE)4.2%
Signal preview: if the month ended today
- SPY51%
- DBC43%
- BIL5.8%
Unofficial. The rules only trade on month-end closes.
Trailing returns
Through Sep 25, 2026 · 3Y+ annualised1M
+2.3%
YTD
+11.4%
1Y
+17.6%
3Y
+21.7%
5Y
+12.9%
10Y
+9.8%
Growth of $100
Backtest from Mar 1, 2007 to Sep 25, 2026 (19.5 years)
Growth of $100, rebased to the start of the selected range. Month-end prices, dividends reinvested, no taxes or trading costs.
Risk & return, full backtest
CAGR
+7.6%
Volatility
11.5%
Max drawdown
-25.9%
Sharpe
0.58
Sortino
0.79
Calmar
0.29
Best year
+31.5%
Worst year
-13.4%
Drawdowns
Percent below the prior peak, vs the S&P 500
Calendar-year returns
Faded bars are partial years · 62% of months positive
Strategy Lab
Stress-test the implementation: trade on the signal day's close or later, split the portfolio into tranches that rebalance on different days (reduces timing luck), or swap a fund for a same-asset-class alternative.
The idea
CAA uses momentum as the expected return in a Markowitz optimisation. The strongest half of the universe is optimised long-only, with a T-bill sleeve, for the highest expected return at 10% annualised volatility. This implementation uses a projected-gradient solver rather than the critical line algorithm.
The rules
- 1Universe: SPY, EFA, EEM, VNQ, DBC, GLD, IEF, TLT.
- 2Keep the top 4 by average 1, 3, 6, 12-month return.
- 3Mean-variance weights (1 year of daily covariance) targeting 10% volatility; the rest in T-bills.
Funds used
- DBC Commodities
- EEM Emerging Markets
- EFA Intl Developed (EAFE)
- GLD Gold
- IEF 7-10Y Treasuries
- SPY S&P 500
- TLT 20+Y Treasuries
- VNQ US REITs
Early history uses proxy funds: SHY.
Recent allocations
Decided at each month-end, held the following month
- Aug 2026
- Jul 2026
- Jun 2026
- May 2026
- Apr 2026
- Mar 2026
- Feb 2026
- Jan 2026
- Dec 2025
- Nov 2025
- Oct 2025
- Sep 2025
More risk-aware momentum
Adaptive Asset Allocation
Butler, Philbrick & Gordillo
Top 5 of 10 by momentum, weighted for minimum variance.
Inverse-Volatility GTAA
Risk-weighted variant
GTAA Aggressive picks, sized by inverse volatility.
Elastic Asset Allocation
Wouter Keller & Adam Butler
Weights ∝ return × diversification ÷ volatility.