DAA (Defensive Asset Allocation)
Compute 13612W momentum for canary assets (VWO, BND). Count n = number of canary assets with momentum is at most 0. Backtest max drawdown: -19.5%.
Strategy & methodology
Compute 13612W momentum for canary assets (VWO, BND); Count n = number of canary assets with momentum <= 0; Cash fraction CF = n / B (B=2), yielding 0%, 50%, or 100%; CF=0%: top 6 offensive assets by 13612W, equal weight (~16.7% each)…
- Strategy type:
- Tactical asset allocation
- Rebalance frequency:
- Monthly
- Original publication:
- 2018-07-12; results after that are out-of-sample for the original research. All results are backtest simulations.
- Data through:
- Backtest data through 2026-10-01.
Simulated history
Stand-in funds and until when (13)
- HYG: VWEHX before Apr 11, 2007
- GSG: DBC before Jul 21, 2006
- VWO: EEM before Mar 10, 2005
- VGK: EFA x1.05 before Mar 10, 2005
- VNQ: VGSIX before Sep 29, 2004
- TLT: VUSTX before Jul 26, 2002
- SHY: VFISX before Jul 26, 2002
- LQD: PIGIX before Jul 26, 2002
- IEF: VFITX before Jul 26, 2002
- LQD: VWESX before Jul 26, 2002
- VNQ: FRESX before Sep 29, 2004
- EWJ: PRJPX before Mar 18, 1996
- SPY: VFINX before Jan 29, 1993
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
Compute 13612W momentum for canary assets (VWO, BND). Count n = number of canary assets with momentum is at most 0. Backtest max drawdown: -19.5%. 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 a7b29a50, published 2026-10-01
Is DAA (Defensive Asset Allocation) still working in 2026?
DAA (Defensive Asset Allocation) returned 11.18% over the trailing 12 months and 38.66% over 36 months through 2026-10-01, compared with a full-backtest annualized return of 11.68%. Its full-backtest maximum drawdown was -19.51%. The full sample contains 10341 daily NAV observations from 1986-02-28. These are model results, not investor account returns or a promise. As of 2026-10-01 it is -3.04% below its high-water mark of 2026-06-02, 4 months ago, and its longest run below a previous high was 4.0 years. Recent returns do not establish that the strategy will keep working.
| Period | Return | CAGR | Max drawdown | Observations | Dates |
|---|---|---|---|---|---|
| Trailing 12 months | 11.18% | Not annualized | -5.92% | 252 | 2025-10-01 to 2026-10-01 |
| Trailing 36 months | 38.66% | Not annualized | -12.47% | 754 | 2023-09-29 to 2026-10-01 |
| Full backtest | 8763.90% | 11.68% | -19.51% | 10341 | 1986-02-28 to 2026-10-01 |
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 2026-06-02, 4 months before 2026-10-01, and it is -3.04% below that level now. The longest run below a previous high in the full backtest was 4.0 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.
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 2026-10-01 (40.6 years): 11.7% CAGR, 1.28 Sharpe, -19.5% max drawdown, 9.5% volatility.
- Type
- Tactical (TAA)
- Author
- Wouter J. Keller & Jan Willem Keuning
- Rebalancing
- Monthly
- Risk
- Moderate
- Period
- 1986-02-28 to 2026-10-01
- CAGR
- 11.7%
- Sharpe
- 1.28
- Max Drawdown
- -19.5%
- Volatility
- 9.5%
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.
DAA (Defensive Asset Allocation): frequently asked questions
- What is Defensive Asset Allocation?
- 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. Monthly rebalancing.
- Who created the DAA (Defensive Asset Allocation) strategy?
- DAA (Defensive Asset Allocation) was developed by Wouter J. Keller & Jan Willem Keuning. It is based on Keller, W.J. & Keuning, J.W. (2018). Defensive Asset Allocation (DAA).
- What is the historical return and maximum drawdown of DAA (Defensive Asset Allocation)?
- Backtested from 1986-02-28 to 2026-10-01, DAA (Defensive Asset Allocation) returned 11.7% CAGR with a -19.5% maximum drawdown and a Sharpe ratio of 1.28. Past performance does not guarantee future results.
- How often is DAA (Defensive Asset Allocation) rebalanced?
- DAA (Defensive Asset Allocation) is rebalanced monthly. BestFolio publishes the updated allocation signal each period.
- Is DAA (Defensive Asset Allocation) a tactical asset allocation strategy?
- Yes. DAA (Defensive 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 (1986-02-28 to 2026-10-01)
| Metric | DAA (Defensive Asset Allocation) |
|---|---|
| CAGR | 11.7% |
| Max Drawdown | -19.5% |
| Sharpe | 1.28 |
| Sortino | 2.44 |
| Volatility | 9.5% |
| Calmar | 0.60 |
| Total Return | 8742.6% |
| Backtest Period | 40.6 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
- 2
- 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
Further reading
New to this approach? Read what tactical asset allocation is and how it works.
Holding DAA (Defensive Asset Allocation) alongside another strategy? Use the free portfolio overlap calculator to see how much of the two portfolios actually differs.
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- 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.