Global Asset Allocation Strategy - February Update

Global Asset Allocation Strategy – February Update

Each month I like to post an update to our global asset allocation strategy. This month has been a bit busy and I am late to post the changes.

Below is how the strategy performed in January –

Rel Stregth perf

Overall, performance was rather dismal as volatility increased in global markets.

However, in February, the model has bounced back a bit:

feb screen capture

Model testing and research done with ETFreplay

Strategy Rules:

The rules for the model are to examine a prescreened global ETF universe to find the top ten ETFs with the highest relative strength. Those 10 ETFs are then allocated equal weight within a portfolio, then overlayed with the 10 month moving average.

ETF Universe: etf global asset allocation

If the ETF is trading below the 10 month moving average, it is replaced with iShares Barclays 20+ Yr Treasury Bond ETF (“TLT”).

This model underperformed the S&P 500 index in 2013, but I am curious as to how it will perform in 2014.

What Is A Global Asset Allocation Strategy?

A global asset allocation strategy attempts to take advantage of relative strength and momentum within global markets. Typically asset classes are used via ETFs or mutual funds instead of individual securities, as the latter may have higher overall transaction costs.

Since most of these strategies focus on quantitative methodologies, they tend to have shorter holding periods when compared with a portfolio holding individual equities. As a result, positions are typically held less than a year and can rotate between various asset classes such as equities, fixed income, currency, etc.

The objective is to provide investors with the opportunity to invest in economies around the world — both major and emerging — while providing a risk-based approach in order to reduce exposure to volatile economies during uncertain times.



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