Global Tactical
Allocation Model
The Generation Global Tactical Allocation Model is generally for clients whose principal objective is long-term capital appreciation.
A ‘go anywhere’ strategy covering the four major asset classes (equities, fixed income, commodities, and real assets—such as real estate, infrastructure, and natural resources), the Global Tactical Allocation Model’s portfolio composition responds to changing economic data, valuations, and market momentum. The Model’s exposure to asset classes is achieved indirectly through investment in ETFs.1
Our process combines macroeconomic analysis with valuation and momentum. Macroeconomic analysis identifies countries or regions that are experiencing growth and low inflation. Valuation tools spot valuation risk and relative value opportunities. Momentum ensures macro trends are corroborated by price trends.
1The Model’s exposure to asset classes is achieved indirectly through investment in ETFs. Equities exposure is through ETFs that invest in equity securities based in/on various jurisdictions, sectors, and/or investment style (e.g., growth vs. value). Real assets exposure is through ETFs that invest in real assets or entities—such as REITs or operating companies—that physically hold real assets or have substantial operations based on real assets. Income exposure is through ETFs that invest in fixed income. Commodities exposure is through ETFs that invest in physical commodities, commodity futures, or entities engaged in commodity-related businesses.
| # | HOLDING |
|---|---|
| 01 | ISHARES INC MSCI THAILAND ETF |
| 02 | ISHARES MSCI INDONESIA ETF |
| 03 | ISHARES CORE US AGGREGATE BOND ETF |
| 04 | ISHARES INC MSCI THAILAND ETFISHARES US INSURANCE ETF |
| 05 | PACER INDUSTRIAL REAL ESTATE ETF |
| 06 | INVESCO GBL LTD PRIV EQI ETF |
| 07 | VANGUARD INTL DIV APPREC ETF |
| 08 | ISHARES SP/TSX CP REI ETF |
| 09 | FRANKLIN GLB GRWTH FD ETF S |
| 10 | VANGUARD TOTAL INTL BOND ETF |
DYNAMIC EXPOSURE
Dynamic Exposure to the Four Major Asset Classes
Our technology platform aggregates macroeconomic, valuation, and momentum data for over 400 ETFs across the four major asset classes, providing us with a broad perspective of the global economy.
RESPONSIVE
Allocation that responds to the business cycle and valuations
To the Business Cycle
We actively monitor economic conditions across the major economic regions and countries. As economic conditions change throughout the business cycle, allocation to major asset classes, shifts. Equities, real estate, and pro-cyclical sectors are emphasized as the economy expands. Repositioning to fixed income ETFs takes place as interest rates fall and economic growth slows.
To Valuations
As demonstrated by the 2000 dot-com bubble, exuberance before the ’08 financial crisis, and the 2020 fixed income bubble, high valuations represent a significant risk for investors. We monitor the valuations of over 250 ETFs within the four major asset classes, preferring those that our analysis indicates are the most undervalued with the highest return potential, and avoiding those that we believe are trading above fair market value.
“Our aim is to outperform a traditional equity and fixed income portfolio over a full business cycle while dampening volatility and achieving a low correlation to the major equity indices.”
Investment Process
Our process combines macroeconomic analysis with momentum and valuation, delivering an investment strategy driven by three complimentary return drivers.
Macro Analysis
Country and regional economic data points identify areas of strength and weakness. Inflation data guides allocation to equities, real assets, and commodities. Market return and yield spreads inform investor risk appetite.
Valuation
Our valuation analysis spots valuation risk and potential opportunities, enabling us to overweight asset classes with the highest return potential and avoid asset classes that are overvalued.
Momentum
Momentum ensures macro trends are corroborated by price trends. Our proprietary security trading model, TRAC™, helps to optimize the timing of our ETF purchases and sales.
We aggregate economic signals for more than 20 countries and 6 economic regions
Portfolio composition is responsive to changing economic variables. Our macro analysis uses the inputs in the table below to guide our asset allocation. As GDP growth rises and risk aversion falls, pro-cyclical assets are ranked higher. Defensive assets receive higher rankings when risk aversion rises. Fixed income ETFs become attractive when growth slows and the yield curve inverts.
| Asset Type | GrowthIncreasing GDP Growth Expectations | Business CyclePositive Yield Curve | Monetary PolicyRising 2-Year Treasury Yield | InflationIncreasing Inflation Expectations | Yield SpreadNarrowing Credit Spreads | Market ReturnPositive 1-Year Market Return |
|---|---|---|---|---|---|---|
| Pro Cyclical | + | + | − | − | + | + |
| Fixed Income | − | − | − | − | − | − |
| Defensive | + | + | − | − | − | − |
| Commodities | + | + | − | + | + | + |