Mebane Faber has done us the favor of distilling and summarizing a lot of research around asset allocation strategies into a simple post. He lists the types and compositions of the most popular asset allocation strategies, such as 60/40, David Swensen’s Portfolio (made famous by its use at Yale University), the Permanent Portfolio, the Ivy Portfolio, etc. He also kindly provides a performance table with the key statistics. As expected, the Permanent Portfolio and the Risk Parity Portfolio do best at minimizing drawdown, but the CAGR across the strategies is surprisingly close. As always, read the whole thing.
Then you can check out Turnkey Analyst’s tool at turnkeystats.com to test these strategies across various asset classes and dates. Nifty.
After you’re done, head on over to GestaltU’s series on Dynamic Asset Allocation (Part 1, Part 2, Part 3, Part 4) for ideas on how to construct an asset allocation model based on risk-adjusted momentum that incorporates portfolio optimization techniques.