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TAA - Risk and Return - Strategies and Processes

Tactical Asset Allocation - Strategies and Processes

Tactical Asset Allocation (TAA or GTAA) describes a strategy of deviating from a long-term strategic allocation, in order to generate added value, or alpha.

The Savvy Research team has selected a variety of white papers which examine various facets of the TAA process and philosophy. The papers below examine methods for market timing, overlay strategies, risk control and TAA implementation.
 

parkour TAA risk return strategies

A Tactical Asset Allocation Workflow (Axioma, 2018)
This paper explores the use of active overlay TAA strategies, used either to de-risk the strategic portfolio in times of market stress, or to add alpha by aligning the portfolio with the economic cycle over shorter time periods.

Multi-Asset Class Modeling: The end of traditional asset classes? (Jacobi, 2018)
It seems like investment managers everywhere are rushing to put a risk factor spin on their investment processes. But what exactly are the advantages of using risk factors rather than asset classes?

TAA Implementation: Optimizing Product Selection (Greenwich Associates, 2018)
When implementing tactical asset allocation decisions, investment managers have a variety of choices, including cash, indexes, ETFs and futures. What is the process by which investors make this choice? And how can it be improved?

Podcast: What Investors Need to Know About Portfolio Optimization (State Street)
Pitched at an introductory level, this podcast centres around a series of in-depth conversations with experts from State Street Global Advisors with the aim of bringing investment processes to life. 

A Quantitative Approach to TAA (Mebane Faber)
Faber examines a simple quantitative method that improves the risk-adjusted returns across various asset classes, achieving equity like returns with bond like volatility and drawdowns.

Fact, Fiction and Momentum Investing (AQR Capital, 2015)
Authored by Cliff Asness and others from AQR Capital, this paper examines the "myths" surrounding momentum investing, using results from a variety of academic studies.

The Correlation See-Saw (Axioma, Jun 2018)
In this paper, Christoph Schon analyzes how the different correlation regimes present during H1 2018 affected the overall volatility and risk decomposition of Axioma’s global multi-asset class model portfolio.

Market Timing: Resolving the Valuation Puzzle (Cliff Asness, 2017)
The authors of this paper propose a practical enhancement to value timing strategies: adding a dose of momentum.

Equity Market Valuation: Multiple choice (UBS Asset Management, Sept 2017)
With U.S. equity multiples looking full, analysts at UBS AM take a deeper look at the PE ratio and assess its information value to investors as a predictor of forward index returns.

How Volatility Events Affect Asset Class Performance (PGIM, Apr 2018)
(For compliance reasons, this paper is only accessible in the United States)
PGIM’s Institutional Advisory & Solutions (IAS) group investigates asset class performance before, during, and after volatility events. Specifically, how do stocks and bonds perform during such events?

Portfolio Emulation (Russell Investments, 2018)
(For compliance reasons, this paper is only accessible in certain geographies)
Portfolio emulation is a key innovation for active institutional investing. It's designed to deliver improved investment performance, but also provides investors with more control over the implementation process.

Stocks, Bonds and Causality (PIMCO, Mar 2018)
The authors of this paper tackle the relationship between stocks and bonds along several fronts, examining the historical record and relating this to an econometric model of causality.

Balanced portfolios: Safer without bonds? (Hermes IM blog, Jan 2018)
(For compliance reasons, this paper is only accessible in certain geographies)
This report examines stock-bond correlations over the last 90 years, identifying eight shifts, or reversals, in the correlation between US stocks and bonds since 1929.

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