Defensive Rotation
A family of ballast sleeves with no stocks in them, built to sit next to a portfolio at a fixed weight. Backtest max drawdown: -12.1%.
Strategy & methodology
A family of ballast sleeves with no stocks in them, built to sit next to a portfolio at a fixed weight.
- Strategy type:
- Tactical asset allocation
- Rebalance frequency:
- Monthly
- Original publication:
- 2023-02-03; results after that are out-of-sample for the original research. All results are backtest simulations.
- Data through:
- Backtest data through 2026-10-06.
Simulated history
Stand-in funds and until when (3)
- TIP: VIPSX before Dec 5, 2003
- IEF: VFITX before Jul 26, 2002
- TIP: PRTNX before Dec 5, 2003
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
A family of ballast sleeves with no stocks in them, built to sit next to a portfolio at a fixed weight. Backtest max drawdown: -12.1%. 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 0e4ed69a, published 2026-10-07
Is Defensive Rotation still working in 2026?
Defensive Rotation returned 1.09% over the trailing 12 months and 4.38% over 36 months through 2026-10-06, compared with a full-backtest annualized return of 7.37%. Its full-backtest maximum drawdown was -12.06%. The full sample contains 13440 daily NAV observations from 1974-02-28. These are model results, not investor account returns or a promise. As of 2026-10-06 it is -2.09% below its high-water mark of 2024-09-24, 2.0 years ago, and its longest run below a previous high was 2.9 years. Recent returns do not establish that the strategy will keep working.
| Period | Return | CAGR | Max drawdown | Observations | Dates |
|---|---|---|---|---|---|
| Trailing 12 months | 1.09% | Not annualized | -3.19% | 252 | 2025-10-06 to 2026-10-06 |
| Trailing 36 months | 4.38% | Not annualized | -6.07% | 752 | 2023-10-06 to 2026-10-06 |
| Full backtest | 4112.88% | 7.37% | -12.06% | 13440 | 1974-02-28 to 2026-10-06 |
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 2024-09-24, 2.0 years before 2026-10-06, and it is -2.09% below that level now. The longest run below a previous high in the full backtest was 2.9 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.
Defensive Rotation at a glance
Defensive Rotation is a tactical asset allocation (TAA) strategy by BestFolio Research, rebalanced monthly. Backtested 1974-02-28 to 2026-10-06 (52.6 years): 7.4% CAGR, 1.19 Sharpe, -12.1% max drawdown, 5.3% volatility.
- Type
- Tactical (TAA)
- Author
- BestFolio Research
- Rebalancing
- Monthly
- Risk
- Conservative
- Period
- 1974-02-28 to 2026-10-06
- CAGR
- 7.4%
- Sharpe
- 1.19
- Max Drawdown
- -12.1%
- Volatility
- 5.3%
Defensive Rotation — Tactical Asset Allocation Strategy
A family of ballast sleeves with no stocks in them, built to sit next to a portfolio at a fixed weight. Each variant holds defensive assets (Treasuries, TIPS and T-bills, and in some variants gold, managed futures, commodities or the dollar) by momentum or trend, and moves toward T-bills when they fall. The default holds IEF, TIP or BIL, whichever returned most over the last 12 months.
Defensive Rotation: frequently asked questions
- What is Defensive Rotation?
- A family of ballast sleeves with no stocks in them, built to sit next to a portfolio at a fixed weight. Each variant holds defensive assets (Treasuries, TIPS and T-bills, and in some variants gold, managed futures, commodities or the dollar) by momentum or trend, and moves toward T-bills when they fall. The default holds IEF, TIP or BIL, whichever returned most over the last 12 months.
- Who created the Defensive Rotation strategy?
- Defensive Rotation was developed by BestFolio Research.
- What is the historical return and maximum drawdown of Defensive Rotation?
- Backtested from 1974-02-28 to 2026-10-06, Defensive Rotation returned 7.4% CAGR with a -12.1% maximum drawdown and a Sharpe ratio of 1.19. Past performance does not guarantee future results.
- How often is Defensive Rotation rebalanced?
- Defensive Rotation is rebalanced monthly. BestFolio publishes the updated allocation signal each period.
- Is Defensive Rotation a tactical asset allocation strategy?
- Yes. Defensive Rotation 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 (1974-02-28 to 2026-10-06)
| Metric | Defensive Rotation |
|---|---|
| CAGR | 7.4% |
| Max Drawdown | -12.1% |
| Sharpe | 1.19 |
| Sortino | 2.40 |
| Volatility | 5.3% |
| Calmar | 0.61 |
| Total Return | 4112.9% |
| Backtest Period | 52.6 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
- conservative
- Variants
- 7
- Author
- BestFolio Research
Categories
Further reading
New to this approach? Read what tactical asset allocation is and how it works.
Holding Defensive Rotation alongside another strategy? Use the free portfolio overlap calculator to see how much of the two portfolios actually differs.
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