Strategies · Core
Defensive Asset Allocation
Keller–Keuning DAA: a canary universe that de-risks the risky sleeve when breadth/momentum in the canaries fails.
Definition
A risky universe and a small canary set (often credit and equity proxies). If canary momentum is weak, replace risky assets with a defensive sleeve (bonds, T-bills). Breadth of momentum, not a single SMA, is the trigger.
Why it matters
It is a more engineered cousin of Faber TAA, aimed at cutting crash months. More moving parts, more specification risk.
Case
A canary that is itself a credit ETF. When credit is the crash, the canary works. When the crash is something the canary does not see, you stay long.
How to read it
Canary list, defensive substitute, and how many canaries must fail. Reproduce the paper’s universe before you ‘improve’ it.
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