Adaptive Asset Allocation
Rank all 10 ETFs (VTI, VGK, VPL, VWO, IEF, TLT, DBC, GLD, VNQ, RWX) by 6-month total return. Select the top 5 assets by return. Backtest max drawdown: -22.3%.
Strategy & methodology
Rank all 10 ETFs (VTI, VGK, VPL, VWO, IEF, TLT, DBC, GLD, VNQ, RWX) by 6-month total return; Select the top 5 assets by return; Calculate 20-day rolling volatility for each selected asset; Weight the 5 selected assets by inverse…
- Strategy type:
- Tactical asset allocation
- Rebalance frequency:
- Monthly
- Original publication:
- 2012-05-31; results after that are out-of-sample for the original research. All results are backtest simulations.
- Data through:
- Backtest data through 2026-10-02.
Simulated history
Stand-in funds and until when (10)
- RWX: VNQ x0.9 before Dec 19, 2006
- VWO: EEM before Mar 10, 2005
- VPL: EWJ x0.9 before Mar 10, 2005
- VGK: EFA x1.05 before Mar 10, 2005
- VNQ: VGSIX before Sep 29, 2004
- TLT: VUSTX before Jul 26, 2002
- IEF: VFITX before Jul 26, 2002
- VTI: VTSMX before May 31, 2001
- VNQ: FRESX before Sep 29, 2004
- VTI: VFINX before May 31, 2001
Before these dates the backtest uses a stand-in, not the fund itself, so the results over those stretches show how the rules would have behaved, not what the fund returned.
Research data and disclosures
Rank all 10 ETFs (VTI, VGK, VPL, VWO, IEF, TLT, DBC, GLD, VNQ, RWX) by 6-month total return. Select the top 5 assets by return. Backtest max drawdown: -22.3%. This is a tactical asset allocation strategy. BestFolio supplies the public rule or approach and backtest context; current signals, allocations, and paid interactive data remain restricted to Pro access. Users review the published signal and place any resulting trades in their own brokerage. Displayed returns remain hypothetical and do not represent a customer's brokerage record. The facts above show how current the data is.
- BestFolio supplies
- The monthly signal email and this strategy page; current signals and email alerts require Pro access.
- Customer action
- Review the published signal and place any required trades in your own brokerage. BestFolio does not execute orders.
- Costs and exclusions
- Backtests are net of a modeled one-way transaction cost (10 bps, scaled up to 3x under stress); taxes, fund-expense drift, or market impact are not modeled. No tax, no slippage beyond the stated cost. Methodology limitations
Published result: Engine drift-until-flip-v1, data version e41d55a0, published 2026-10-01
Is Adaptive Asset Allocation still working in 2026?
Adaptive Asset Allocation returned 17.30% over the trailing 12 months and 56.00% over 36 months through 2026-10-02, compared with a full-backtest annualized return of 10.27%. Its full-backtest maximum drawdown was -22.31%. The full sample contains 10472 daily NAV observations from 1985-08-30. These are model results, not investor account returns or a promise. As of 2026-10-02 it is -2.46% below its high-water mark of 2026-09-04, 28 days ago, and its longest run below a previous high was 3.0 years. Recent returns do not establish that the strategy will keep working.
| Period | Return | CAGR | Max drawdown | Observations | Dates |
|---|---|---|---|---|---|
| Trailing 12 months | 17.30% | Not annualized | -7.58% | 252 | 2025-10-02 to 2026-10-02 |
| Trailing 36 months | 56.00% | Not annualized | -7.89% | 754 | 2023-10-02 to 2026-10-02 |
| Full backtest | 5448.35% | 10.27% | -22.31% | 10472 | 1985-08-30 to 2026-10-02 |
Last verified
Common questions about these results
Are these live investor returns?
No. These are the latest model NAV results from the published backtest. A recent date alone does not make a result an independently observed live record. Investor costs, taxes and execution can differ.
Why can a strategy lag for a year?
A tactical model can hold defensive assets during a rally or change positions during reversals. A short window can differ substantially from its full history. Compare cumulative returns over matching dates and inspect drawdowns as well.
How long has it spent below a previous high?
Its last high-water mark was 2026-09-04, 28 days before 2026-10-02, and it is -2.46% below that level now. The longest run below a previous high in the full backtest was 3.0 years. Recovering from a drawdown can take years, and a strong trailing return does not mean a past high has been regained.
Where can I check the signals behind these results?
The Signals tab on this page lists each dated model decision for the selected variant; for Pro strategies they are visible to Pro members. The methodology page explains the backtest assumptions.
Adaptive Asset Allocation at a glance
Adaptive Asset Allocation is a tactical asset allocation (TAA) strategy by ReSolve Asset Management across US Equity, International Equity, Emerging Markets, REITs, rebalanced monthly. Backtested 1985-08-30 to 2026-10-02 (41.1 years): 10.3% CAGR, 0.91 Sharpe, -22.3% max drawdown, 9.3% volatility.
- Type
- Tactical (TAA)
- Author
- ReSolve Asset Management
- Rebalancing
- Monthly
- Risk
- Moderate
- Period
- 1985-08-30 to 2026-10-02
- CAGR
- 10.3%
- Sharpe
- 0.91
- Max Drawdown
- -22.3%
- Volatility
- 9.3%
Adaptive Asset Allocation — Tactical Asset Allocation Strategy
Adaptive Asset Allocation (AAA) was developed by the ReSolve Asset Management team (Butler, Philbrick, Gordillo, and Varadi). It combines momentum-based asset selection with minimum-variance weighting to build a dynamically adapting portfolio.
Each month, the strategy ranks a universe of 10 diversified ETFs by their 6-month total return and selects the top 5. These top performers are then weighted using inverse 20-day volatility, which approximates a minimum-variance allocation. Assets with lower recent volatility receive proportionally larger allocations.
Adaptive Asset Allocation: frequently asked questions
- What is Adaptive Asset Allocation?
- Momentum selection with risk-based sizing. Ranks 10 global assets by 6-month momentum, selects the top 5, then weights them by inverse 20-day volatility. Combines return-chasing with volatility-aware position sizing. Monthly rebalancing.
- Who created the Adaptive Asset Allocation strategy?
- Adaptive Asset Allocation was developed by ReSolve Asset Management. It is based on Butler, Philbrick, Gordillo, Varadi. Adaptive Asset Allocation. ReSolve Asset Management..
- What is the historical return and maximum drawdown of Adaptive Asset Allocation?
- Backtested from 1985-08-30 to 2026-10-02, Adaptive Asset Allocation returned 10.3% CAGR with a -22.3% maximum drawdown and a Sharpe ratio of 0.91. Past performance does not guarantee future results.
- How often is Adaptive Asset Allocation rebalanced?
- Adaptive Asset Allocation is rebalanced monthly. BestFolio publishes the updated allocation signal each period.
- Is Adaptive Asset Allocation a tactical asset allocation strategy?
- Yes. Adaptive Asset Allocation is a tactical asset allocation (TAA) strategy: it adjusts its holdings based on market signals each period rather than holding a fixed allocation.
Backtest Performance (1985-08-30 to 2026-10-02)
| Metric | Adaptive Asset Allocation |
|---|---|
| CAGR | 10.3% |
| Max Drawdown | -22.3% |
| Sharpe | 0.91 |
| Sortino | 1.50 |
| Volatility | 9.3% |
| Calmar | 0.46 |
| Total Return | 5439.9% |
| Backtest Period | 41.1 years |
Every rebalance fills at the signal-day close, net of modeled transaction costs. Followers trade at the next open; the delayed-close line in the Rebalance Frequency Sensitivity card shows the effect of trading one session later. Execution assumption
Strategy Details
- Type
- Tactical (TAA)
- Rebalancing
- monthly
- Risk Level
- moderate
- Variants
- 1
- Author
- ReSolve Asset Management
- Source
- Butler, Philbrick, Gordillo, Varadi. Adaptive Asset Allocation. ReSolve Asset Management.
Asset Classes
- US Equity
- International Equity
- Emerging Markets
- REITs
- Commodities
- Gold
- Bonds
Categories
Further reading
New to this approach? Read what tactical asset allocation is and how it works.
Holding Adaptive Asset Allocation alongside another strategy? Use the free portfolio overlap calculator to see how much of the two portfolios actually differs.
Track Adaptive Asset Allocation in Your Portfolio
Sign up for BestFolio to get monthly rebalancing signals, blend strategies into custom portfolios, and receive alerts when allocations change.