Meb Faber's Ivy Portfolio, inspired by the endowment strategies of Yale and Harvard, is one of the most elegantly simple tactical asset allocation strategies available. Using just the 10-month moving average as a signal, it navigated the 2008 crash with only -8.5% drawdown while the S&P 500 lost -57%. But how has it performed in the modern era?
The Five-Asset Framework
The Ivy Portfolio allocates equally across five asset classes: US Equities, International Equities, REITs (real estate), Commodities, and Bonds. Each month, it checks whether each asset is above or below its 10-month SMA. If above, hold it. If below, move that 20% allocation to cash. This systematic trend filter is the key innovation.
Modern Era Performance (2015–2025)
The 2015-2025 decade was challenging for the Ivy Portfolio due to the unusual strength of US equities relative to other asset classes. Commodities repeatedly fell below their 10-month SMA, triggering exits. REITs were volatile. However, the absolute momentum filter successfully avoided the 2020 COVID crash (partially) and limited 2022 losses significantly.
UCITS ETF Implementation for Europe
European investors can implement Ivy with: CSPX (US Equities), IWDA (International Equities), TRET (Global REITs UCITS), CMOD (Commodities), AGGG (Bonds). Calculate the 10-month SMA using free tools like Portfolio Visualizer or Yahoo Finance. Check signals on the last trading day of each month.
"Dual momentum is the clean integration of relative strength momentum and trend following absolute momentum. They complement each other perfectly." — Gary Antonacci
The GEM Execution Rules
GEM is rebalanced exactly once per month. At the end of each month, the investor carries out the following steps:
- Calculate the trailing 12-month return of S&P 500 (representing US stocks) and MSCI ACWI ex-US (representing global stocks).
- Select the index with the higher return.
- Compare the return of this winning index to the trailing 12-month return of 1-3 Month Treasury Bills (cash proxy).
- If the winning equity return is greater than cash, invest 100% in that equity index. Otherwise, invest 100% in a broad U.S. Aggregate Bond index (like BND or AGG).
Why GEM Works
Historically, equities spend about 70-80% of the time in bull markets. Relative momentum keeps the investor aligned with the strongest equity markets (whether that's US tech stocks or international value plays). However, when severe bear markets emerge (such as the 2008 financial crisis or the 2000 dot-com crash), absolute momentum acts as a circuit breaker, moving the entire portfolio into high-quality bonds. This reduces drawdown risk and protects capital.
ETF Implementations
A typical retail investor can implement GEM using just three low-cost, liquid ETFs:
- US Stocks: Vanguard S&P 500 ETF (VOO) or SPDR S&P 500 ETF (SPY)
- International Stocks: Vanguard Total International Stock ETF (VXUS) or iShares Core MSCI ACWI ex U.S. ETF (ACWX)
- Aggregate Bonds: Vanguard Total Bond Market ETF (BND) or iShares Core U.S. Aggregate Bond ETF (AGG)
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