Defensive Asset Allocation (G12)

ActiveLow Volatility

updateRebalanced: N/AAuthor: Wouter Keller

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CAGR

trending_up

22.8%

Compound Annual Growth Rate

Max Drawdown

water_drop

-37.8%

Worst peak-to-trough decline

Sharpe Ratio

analytics

1.19

Risk-adjusted return metric

Win Rate

verified

71%

Percentage of positive months

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Allocation Locked

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Strategy Methodology

Defensive Asset Allocation (DAA) is a "Breadth Momentum" strategy designed to reduce drawdowns significantly. It uses a "Canary" universe to determine how much capital should be exposed to risk.

check_circleCanary Indicators: Monitors VWO (Emerging Markets) and BND (Bonds). The number of bad canaries determines the cash position (0%, 50%, or 100%).
check_circleOffensive Assets: Selects the top 2 performing assets from a diversified universe of 12 global ETFs (The "G12" universe).
check_circleRebalancing: Evaluated on the last trading day of every month. Trades are executed on the first trading day of the next month.

school

Academic Backing

Based on the paper "Breadth Momentum and the Canary Universe" by Wouter Keller and JW Keuning. The strategy introduces the concept of "protection factors" to dynamically adjust market exposure.

Parameters

Lookback Period

13612W (Weighted)

Top Assets Selected

Top 2 (Weighted by Risk)

Canary Universe

VWO, BND

Asset Universe Size

12 ETFs (G12)

Monthly Rebalancing Process

4-Step Execution

STEP 1: THE CANARIES

publicaccount_balance

Check Market Health

Monitor VWO (Emerging) & BND (Bonds)

STEP 2: PROTECTION LEVEL

2 Bad Signals100% Cash

1 Bad Signal50% Cash

0 Bad Signals0% Cash

STEP 3: ASSET SELECTION

Rank "G12" Universe

Score 12 global assets by momentum

#1 Pick

#2 Pick

STEP 4: PORTFOLIO MIX

Final Allocation

Combine Cash + Top 2 Picks based on Protection Level

STEP 1

Check The Canaries

We check two distinct markets to gauge global risk.

Emerging MarketsVWO

US Bond MarketBND

Why these two?

VWO represents risky growth assets outside the US. BND represents the safety of the bond market. If either of these is trending downwards, it indicates stress in the global financial system.

Healthy Market

Both VWO & BND are trending UP.

Invest 100% in risky assets.

Risky Market

One or both are trending DOWN.

Move 50% or 100% to Cash.

STEP 2 & 3

Asset Selection

Regardless of market health, we always rank our "Offensive" G12 universe to find the strongest assets.

The "G12" Universe

domainSPY (S&P 500)

storefrontIWM (Small Cap)

publicVGK (Europe)

trending_upEWJ (Japan)

apartmentVNQ (Real Estate)

oil_barrelDBC (Commodities)

account_balanceTLT (20yr Bond)

diamondGLD (Gold)

Asset RankMomentum ScoreAction

1. QQQHighBUY

2. GLDMed-HighBUY

3. SPYMedium--

4. DBCLow--

STEP 4

Portfolio Construction

We combine the "Safe Bucket" (determined by Step 1) and the "Risky Bucket" (determined by Step 3) to create the final portfolio.

Scenario A

0 Bad Canaries

100% Risky

Scenario B

1 Bad Canary

50% Risky / 50% Cash

Scenario C

2 Bad Canaries

100% Cash

Recent Monthly Returns

Year	Jan	Feb	Mar	Apr	May	Jun	Jul	Aug	Sep	Oct	Nov	Dec	YTD
2026	+7.89%	+0.00%	-	-	-	-	-	-	-	-	-	-	+7.89%
2025	+4.74%	+0.73%	+4.93%	+4.83%	+2.61%	+1.44%	+0.04%	+2.98%	+8.72%	+3.80%	+2.68%	+2.85%	+48.31%
2024	+0.95%	+3.94%	+3.77%	-0.52%	+3.34%	+0.80%	+3.29%	+3.97%	+4.18%	+0.47%	+6.01%	-1.91%	+31.89%