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 2026-07-03 (40.3 years): 12.4% CAGR, 1.32 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 2026-07-03
- CAGR
- 12.4%
- Sharpe
- 1.32
- 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.
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 2026-07-03, DAA (Defensive Asset Allocation) returned 12.4% CAGR with a -19.6% maximum drawdown and a Sharpe ratio of 1.32. 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 2026-07-03)
| Metric | DAA (Defensive Asset Allocation) |
|---|---|
| Compound Annual Growth Rate (CAGR) | 12.4% |
| Maximum Drawdown | -19.6% |
| Sharpe Ratio | 1.32 |
| Sortino Ratio | 2.21 |
| Annualized Volatility | 9.9% |
| Calmar Ratio | 0.63 |
| Total Return | 10892.0% |
| Backtest Period | 40.3 years |
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.
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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.