Mebane Faber GTAA5
Global Tactical Asset Allocation with 10-month SMA trend-following across five major asset classes
The Strategy
The Global Tactical Asset Allocation 5 (GTAA5) strategy was developed by Mebane Faber and published in his influential 2007 paper "A Quantitative Approach to Tactical Asset Allocation." The strategy uses a simple trend-following approach across five major asset classes.
The core methodology is straightforward: invest in each asset class when its price is above its 10-month simple moving average (SMA), otherwise hold cash. Each asset receives an equal 20% allocation when invested, creating a systematic approach to tactical asset allocation.
The strategy's strength lies in its simplicity and robust historical performance. By avoiding assets in downtrends, GTAA5 has historically reduced drawdowns significantly compared to buy-and-hold strategies while maintaining competitive returns.
How It Works
At each month-end, the strategy evaluates each of the five asset classes against their respective 10-month simple moving averages. If an asset's price is above its SMA, 20% of the portfolio is allocated to that asset. If below, that 20% goes to cash (SHY).
The five asset classes are: US Stocks (SPY), Foreign Stocks (EFA), US Bonds (AGG), Commodities (DBC), and Real Estate (VNQ). This diversified approach spans equities, fixed income, alternatives, and real assets.
The dashboard displays real-time signals for each asset, current allocations, portfolio performance versus a buy-and-hold benchmark, and key risk metrics including Sharpe ratio, maximum drawdown, and volatility.
Portfolio Configuration
Set your start date and initial capital. The GTAA5 strategy requires a 10-month lookback period to calculate the SMA for each asset. During this initial period, capital remains uninvested.
Current Signals
Real-time trend signals based on 10-month SMA comparison
Portfolio Performance
Portfolio Drawdown
Current Asset Class Allocation
Current Asset Allocation
Current Holdings
Monthly rebalanced based on 10-month SMA signals • Current Portfolio Value: $100,000
| Symbol | Name | Signal | Weight | Price | SMA (10m) | Shares | Value |
|---|---|---|---|---|---|---|---|
| Loading holdings... | |||||||
Performance Metrics
Next Rebalancing
Scheduled for --
Monthly rebalancing on the last trading day
Strategy Methodology
Trend-Following Timing Rule
The GTAA5 strategy uses a simple but robust trend-following rule based on the 10-month simple moving average:
Signal Generation:
If Price > SMA(10 months): INVEST (20%)
If Price <= SMA(10 months): CASH (0%)
SMA Calculation:
SMA10 = (Pt + Pt-1 + ... + Pt-9) / 10
Using month-end closing prices
"This simple timing model reduces volatility to 10%, max drawdown to 13%, while maintaining equity-like returns." - Faber (2007)
Equal-Weight Allocation
The portfolio allocates equally across all five asset classes:
| Asset | ETF | Weight |
|---|---|---|
| US Stocks | SPY | 20% |
| Foreign Stocks | EFA | 20% |
| US Bonds | AGG | 20% |
| Commodities | DBC | 20% |
| Real Estate | VNQ | 20% |
When an asset's signal is negative, its 20% allocation moves to cash (SHY).
Historical Performance (1973-2012)
From Faber's original research paper:
| Metric | GTAA5 | Buy & Hold |
|---|---|---|
| CAGR | 10.5% | 9.0% |
| Volatility | 7.0% | 10.0% |
| Max Drawdown | -12% | -45% |
| Sharpe Ratio | 0.79 | 0.45 |
Source: Faber, M. (2007) Journal of Wealth Management
References
Faber, M. (2007)
"A Quantitative Approach to Tactical Asset Allocation." Journal of Wealth Management, Spring 2007.
Faber, M. (2013)
"The Ivy Portfolio: How to Invest Like the Top Endowments and Avoid Bear Markets." Wiley.
Antonacci, G. (2014)
"Dual Momentum Investing." McGraw-Hill Education.
Cambria Investment Management
GTAA Strategy Documentation and Updates.
Rebalancing Algorithm
Calculate SMAs
10-month SMA for each of 5 assets
Generate Signals
Compare price vs SMA for each asset
Set Allocations
20% if above SMA, 0% if below
Execute Rebalance
Monthly on last trading day
Disclaimer: This implementation is based on Mebane Faber's published research for educational and informational purposes. Past performance does not guarantee future results. The strategy may experience periods of underperformance relative to buy-and-hold approaches, particularly during strong bull markets. Always conduct your own research before making investment decisions.