How it works

Monthly rotation across 10 global asset classes, based on Meb Faber's Global Tactical Asset Allocation (GTAA, 2007). Every first trading day of the month: rank all assets by momentum, select the top N, filter out those in a downtrend or with negative momentum, and hold cash for the rest.

The 5 variants

AGG 1 through AGG 5 represent the same strategy with different concentration levels. AGG 1 holds 1 asset (100% in the top pick), AGG 5 holds 5 assets (20% each). Lower numbers are more concentrated and volatile; higher numbers are more diversified and smoother.

AGG 3 is the original Faber configuration. AGG 1 is the most aggressive — pure momentum conviction in a single asset class. AGG 5 is the most defensive — half the universe gets capital, reducing single-asset risk at the cost of diluting the momentum signal.

The consolidated universe

The original Faber universe had 13 assets with a heavy bond bias (6 out of 13 were bonds). In a falling rate environment, the top 3 were often 2-3 bond funds — that's a bond portfolio, not diversification.

The consolidated version groups correlated pairs into 10 independent asset classes: US Equity (SPY/QQQ/IWM), Treasuries (IEF/TLT), and Credit (LQD/HYG) each become a single slot. The ranking universe is now balanced across equities, real assets, real estate, and fixed income.

Best horse rule

For the 3 consolidated groups, the ranking decides "should I be in this asset class?" and the best horse rule decides "which ETF has the most momentum right now?"

In practice, QQQ gets selected over SPY about 86% of the time when US equity is in the top N. TLT dominates IEF 5:1 for treasuries. This adds a few basis points of CAGR by riding the more aggressive instrument within each correlated group.

Dual filter

Each selected asset must pass two filters before receiving capital: price above its 10-month moving average (absolute momentum), and average momentum above zero. Both filters avoid riding declining assets. During 2008, the strategy was fully in cash before Lehman collapsed.

Stress testing

Validated across 78 parameter configurations with a CV of Sharpe = 17%. No single asset can break the strategy (max impact of removing any one asset: 0.08 Sharpe). Smaller universes sometimes perform better. The strategy works at every rebalance day tested (1st-20th of the month), though the first few days are consistently better.

UCITS execution

All trades are executed using Irish-domiciled UCITS ETFs on the London Stock Exchange. This avoids the 40% US estate tax on US-listed ETFs for non-US persons. All funds are accumulating (no dividends to reinvest, no withholding tax friction).