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Defining Tactical Asset Allocation

What is a tactical asset allocation strategy?

Nicolas Rabener
10 min read
1 Aug 2022

SUMMARY

  • Tactical asset allocation ETFs charge high fees (0.92% pa) that need to be justified
  • The active share of TAA strategies can be measured via regression analysis
  • High active share does not automatically create value, but offers value-creation potential

INTRODUCTION

The life of equity fund managers is getting increasingly difficult. Many active managers had realized decades ago that creating outperformance is hard, so changed their strategy to essentially provide index-like performance. There is significantly less career risk for a fund manager if the performance is more or less like the benchmark. A generation of index-huggers was thus borne.

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