PAA (Protective Asset Allocation)
TacticalPromoderateBased on research by Wouter J. Keller & Jan Willem Keuning · Keller, W.J. & Keuning, J.W. (2016). Protective Asset Allocation (PAA)
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Launched Apr 5, 2016About this Strategy
Breadth-based crash protection across 12 risky assets. The fraction with positive SMA momentum determines the bond buffer -- more negative assets means more IEF protection.
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 MOM = (price / SMA(13 month-end prices)) - 1 for all 12 universe assets
- 2Count n = number of assets with MOM > 0
- 3Compute n1 = protection_level × N / 4 (default protection_level=2, N=12 → n1=6)
- 4Bond fraction BF = (N - n) / (N - n1), clamped to [0, 1]
- 5Invest BF in IEF (crash protection)
- 6Invest (1 - BF) equally in top 6 assets ranked by MOM
Asset Universe
Pro subscribers only
12 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. (2016). Protective Asset Allocation (PAA)
Strategy Info
- Type
- Tactical (TAA)
- Frequency
- monthly
- Next Rebalance
- Jun 109:30 ET (10d)
- Variants
- 2
- 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
- 12 risky assets + 1 crash protection asset (IEF)
- Scoring Method
- SMA(13) relative momentum: (price / SMA(13 month-end prices)) - 1
- Concentration
- Top 6 assets by momentum, equal weight in the equity portion
- Bond Fraction Formula
- BF = (N - n_positive) / (N - n1), clamped to [0, 1], where n1 = protection_level × N / 4
- Protection Levels
- 0 (none), 1 (low, n1=3), 2 (high, n1=6)
- Leverage Options
- 1x (standard)
- Data Source
- Institutional-grade market data (13 months minimum history)
Asset Classes
PAA (Protective Asset Allocation) at a glance
PAA (Protective 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): 9.4% CAGR, 1.16 Sharpe, -14.2% max drawdown, 8.0% volatility.
- Type
- Tactical (TAA)
- Author
- Wouter J. Keller & Jan Willem Keuning
- Rebalancing
- Monthly
- Risk
- Moderate
- Period
- 1986-02-28 to 2026-05-20
- CAGR
- 9.4%
- Sharpe
- 1.16
- Max Drawdown
- -14.2%
- Volatility
- 8.0%
PAA (Protective Asset Allocation) — Tactical Asset Allocation Strategy
Protective Asset Allocation (PAA) by Keller & Keuning uses a breadth-based approach to determine how much of the portfolio should be in crash protection (bonds) vs. risky assets. It counts how many of the 12 universe assets have positive SMA(13) momentum, then computes a bond fraction that scales smoothly from 0% to 100% based on a configurable protection level. The risky portion is allocated equally across the top 6 assets ranked by momentum. This gradual scaling provides a smoother risk-on/risk-off transition than the binary VAA approach.
Backtest Performance (1986-02-28 to 2026-05-20)
| Metric | PAA (Protective Asset Allocation) |
|---|---|
| Compound Annual Growth Rate (CAGR) | 9.4% |
| Maximum Drawdown | -14.2% |
| Sharpe Ratio | 1.16 |
| Sortino Ratio | 1.45 |
| Annualized Volatility | 8.0% |
| Calmar Ratio | 0.66 |
| Total Return | 3628.1% |
| Backtest Period | 40.2 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. (2016). Protective Asset Allocation (PAA)
Asset Classes
- US Equity
- Small Cap
- Tech
- Europe
- Japan
- Emerging Markets
- REITs
- Commodities
- Gold
- High Yield Bonds
- Corporate Bonds
- Long-Term Treasuries
Categories
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