- dual momentum based timing and selection mechanism
- innovative c(r)ash protection routine through protective momentum
- support for separate “risk-on” and “risk-off" universes
In our quest for a yield neutral absolute return performance strategy Wouter Keller and I developed PAA (long only) with its innovative protective momentum approach for capital preservation in times of market turmoil. The interested reader might consider reading our PAA-paper on SSRN too.
PAA exploits the well-defined momentum phenomenon: the empirically observed tendency for asset prices to keep moving in the same direction. By applying PAA to a broad diversified global universe of sufficiently uncorrelated ETFs, PAA will auto-detect bull trends that emerge. Meanwhile protective momentum keeps guard over global market-breadth to adjust the “equity” : “cash” spread of the portfolio. And when trends shift, PAA catches the change and adapts, be it bullish or bearish. In doing so PAA is purely mechanical, so there is no need second guessing market conditions nor predicting trends. PAA is capable of delivering absolute return performance with 1-year-rolling-return win rates of more than 95% (R1yWin>0%) and 99% (R1yWin>-5%).
|Equity chart of the PAA strategy demonstrating high return/risk performance|