TAA portfolios: Antonacci’s Composite Dual Momentum

Note: thanks to those who signed up to Allocate Smartly through my link. It’s provided a nice extra revenue stream that is much appreciated.

One of the TAA strategies that I have often been asked about is Antonacci’s Composite Dual Momentum (ACDM from now on). I never got around to tracking or writing about it but now the the folks at Allocate Smartly have it covered. In this post I’ll highlight the key details of the strategy and it’s results using the recent blog post from Allocate Smartly.

The ACDM strategy basically applies the dual momentum concept from Antonacci’s GEM strategy to a broader array of asset classes. I also covered GEM on my portfolios page. The strategy uses four areas of the market with a 25% allocation to each re-balanced monthly; equites (US or International stocks), credit risk (corporate or high yield bonds), real estate (equity REITs or mortgage REITs), and economic stress (gold or long US treasuries). It then applies to dual momentum concept to each. Does this remind you of any other TAA strategy already? I’ll come back to that but first let’s look at the results going back to 1985.

Pretty impressive. Strong results in absolute terms and especially in risk adjusted returns. These kinds of risk adjusted returns are great for enhancing safe withdrawal rates from retirement portfolios. Here is the drawdown curve for ACDM.

Drawdowns are also quite impressive with a max monthly drawdown of less than 10%. The 4 market regimes remind me of the the Permanent Portfolio. The market regimes are meant to be less correlated which leads to better overall risk adjusted portfolio results.  The ACDM seems to accomplish this, just like the Permanent Portfolio, but with better returns and lower drawdowns. There is not enough historical return data to calculate a comparable SWR but it would arguably be better than the Permanent Portfolio’s 1966 SWR of 5.6% which is already better than the traditional 60/40 portfolio’s SWR of 4.3%

Overall, ACDM looks like quite a powerful and well diversified strategy. In particular with it’s strong risk adjusted performance it could be a good fit for those investors in the retirement phase of their investing who are withdrawing from their portfolios and seeking to maximize SWRs (safe withdrawal rates) with TAA portfolios.