DAA (Defensive Asset Allocation)
TacticalPromoderateBased on research by Wouter J. Keller & Jan Willem Keuning · Keller, W.J. & Keuning, J.W. (2018). Defensive Asset Allocation (DAA)
This is BestFolio's independent implementation. Not affiliated with or endorsed by the original author.
Launched Jul 12, 2018About this Strategy
Dual-canary crash protection with three-tier allocation. VWO and BND momentum controls a 0/50/100% bond fraction; offense selects top 6 of 12 global assets by weighted multi-period momentum.
The complete strategy logic, asset universe, and rebalancing rules are available to Pro subscribers. This includes the full methodology description, author notes, and implementation details.
Pro subscribers also get access to current signals, full backtest history, and the ability to blend this strategy into custom portfolios.
Strategy Rules
Pro subscribers only
- 1Compute 13612W momentum for canary assets (VWO, BND)
- 2Count n = number of canary assets with momentum <= 0
- 3Cash fraction CF = n / B (B=2), yielding 0%, 50%, or 100%
- 4CF=0%: top 6 offensive assets by 13612W, equal weight (~16.7% each)
- 5CF=50%: top 3 offensive (equal weight, 50% total) + 50% in best defensive asset
- 6CF=100%: 100% in best defensive asset (SHY, IEF, or LQD) by 13612W
Asset Universe
Pro subscribers only
15 instruments this strategy can hold
Key Differentiators
Research Source
Based on research by Wouter J. Keller & Jan Willem Keuning
Keller, W.J. & Keuning, J.W. (2018). Defensive Asset Allocation (DAA)
Strategy Info
- Type
- Tactical (TAA)
- Frequency
- monthly
- Next Rebalance
- Jun 109:30 ET (10d)
- Variants
- 1
- Risk Category
- moderate
- Tags
- momentum, multi asset
- Type
- Tactical Asset Allocation (TAA)
- Trading Frequency
- Monthly (last trading day)
- Rebalancing
- Full portfolio rebalance each month
- Universe Size
- 2 canary + 12 offensive + 3 defensive assets
- Scoring Method
- 13612W momentum (12×1m + 4×3m + 2×6m + 1×12m returns)
- Concentration
- Top 6 offensive assets (equal weight ~16.7% each) when fully aggressive
- Cash Fraction Tiers
- 0% (both canary positive), 50% (1 canary negative), 100% (both negative)
- Leverage Options
- 1x (standard) or 2x (leveraged ETF substitution)
- Data Source
- Institutional-grade market data (13 months minimum history)
Asset Classes
Investment Universe
DAA (Defensive Asset Allocation) at a glance
DAA (Defensive Asset Allocation) is a tactical asset allocation (TAA) strategy by Wouter J. Keller & Jan Willem Keuning across US Equity, Small Cap, Tech, Europe, rebalanced monthly. Backtested 1986-02-28 to 2026-05-20 (40.2 years): 12.4% CAGR, 1.22 Sharpe, -19.6% max drawdown, 9.9% volatility.
- Type
- Tactical (TAA)
- Author
- Wouter J. Keller & Jan Willem Keuning
- Rebalancing
- Monthly
- Risk
- Moderate
- Period
- 1986-02-28 to 2026-05-20
- CAGR
- 12.4%
- Sharpe
- 1.22
- Max Drawdown
- -19.6%
- Volatility
- 9.9%
DAA (Defensive Asset Allocation) — Tactical Asset Allocation Strategy
Defensive Asset Allocation (DAA) is a broad tactical strategy by Keller & Keuning that uses a dual canary universe (VWO and BND) to detect market stress. The canary assets act as early warning signals: when their 13612W momentum turns negative, the portfolio gradually shifts from a diversified offensive allocation (top 6 of 12 assets) toward a single defensive asset. The three-tier system (0%, 50%, 100% cash fraction) provides a smoother transition than the binary VAA approach.
Backtest Performance (1986-02-28 to 2026-05-20)
| Metric | DAA (Defensive Asset Allocation) |
|---|---|
| Compound Annual Growth Rate (CAGR) | 12.4% |
| Maximum Drawdown | -19.6% |
| Sharpe Ratio | 1.22 |
| Sortino Ratio | 1.61 |
| Annualized Volatility | 9.9% |
| Calmar Ratio | 0.63 |
| Total Return | 10997.6% |
| Backtest Period | 40.2 years |
Strategy Details
- Type
- Tactical (TAA)
- Rebalancing
- monthly
- Risk Level
- moderate
- Variants
- 1
- Author
- Wouter J. Keller & Jan Willem Keuning
- Source
- Keller, W.J. & Keuning, J.W. (2018). Defensive Asset Allocation (DAA)
Asset Classes
- US Equity
- Small Cap
- Tech
- Europe
- Japan
- Emerging Markets
- REITs
- Commodities
- Gold
- Long-Term Treasuries
- High Yield Bonds
- Corporate Bonds
Categories
Track DAA (Defensive 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.
Related strategies
Related research
- Dual Momentum's 2022 Problem: Why Canary Models Worked When GEM Didn't2022 was the cleanest A/B test the tactical asset allocation community is ever going to get. Classic dual momentum strategies (GEM, ADM, CDM) lost between 10 and 24 percent. Three Keller canary-family strategies (BAA-G4, BAA-G12, HAA) closed the year with positive returns. Same tactical framework, completely different design choices, and a lesson about which defensive asset actually defends when the "safe haven" bond is the thing falling.
- How Tactical Asset Allocation Protects Your Portfolio During Market CrisesMarket crises are inevitable. Tactical asset allocation strategies use momentum, trend, and volatility signals to systematically reduce exposure before the worst damage is done. Here is how TAA performed during four major crises.