About Strategy
Meb Faber's tactical allocation model divides capital equally across five asset classes and applies a 10-month moving average trend filter to each. Assets below trend are moved to cash.
Performance Metrics (2016-2026)
| CAGR (10-Year) | 8.8% |
| Max Drawdown | -14.2% |
| Sharpe Ratio | 0.64 |
| Volatility (StdDev) | 8.9% |
| Best Year | +19.6% |
| Worst Year | -8.5% |
| Strategy Type | Tactical Asset Allocation |
| Risk Profile | Medium |
Asset Allocation
The Ivy Portfolio allocates equally across five asset classes (20% each): US Equities (VOO), International Equities (VXUS), Real Estate/REITs (VNQ), Commodities (PDBC), and Intermediate-Term Bonds (IEF). Each asset is independently evaluated using its 10-month simple moving average.
Execution Rules
- Allocate 20% to each of five asset classes: US stocks, international stocks, REITs, commodities, and intermediate bonds.
- At month-end, compare each asset's price to its 10-month simple moving average (SMA).
- If an asset is above its 10-month SMA, maintain the position. If below, sell and hold cash for that allocation slice.
- Rebalance monthly — each asset is evaluated independently, so you may hold 0-5 assets at any given time.
ETF Proxies Used in Our Backtest
- Vanguard S&P 500 ETF (VOO) — 20% US equities
- Vanguard Total International Stock ETF (VXUS) — 20% international equities
- Vanguard Real Estate ETF (VNQ) — 20% REITs
- Invesco Optimum Yield Diversified Commodity ETF (PDBC) — 20% commodities
- iShares 7-10 Year Treasury Bond ETF (IEF) — 20% intermediate bonds
Allocation Calculator
Recommended Allocation
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History & Background of the Ivy Portfolio
The Ivy Portfolio was developed by Meb Faber, co-founder and CIO of Cambria Investment Management, based on his influential 2006 research paper "A Quantitative Approach to Tactical Asset Allocation." The paper's title is now one of the most-downloaded academic papers on SSRN, with over 300,000 downloads.
The "Ivy" name references the endowment funds of Ivy League universities — particularly Harvard and Yale — which pioneered the use of diversified, multi-asset allocation strategies. Faber observed that these endowments achieved superior risk-adjusted returns not through stock picking, but through broad diversification across equities, real estate, commodities, and bonds. The Ivy Portfolio democratizes this approach for individual investors using low-cost ETFs.
The key innovation is the 10-month SMA trend filter. Rather than staying fully invested at all times, the Ivy Portfolio moves to cash when any individual asset class enters a downtrend. This tactical overlay has historically reduced portfolio drawdowns by roughly 50% compared to a buy-and-hold version of the same allocation. The 10-month SMA was chosen because it approximately equals the 200-day moving average, one of the most widely followed technical indicators.
When to Use Ivy Portfolio: Pros & Cons
Strengths
- Broad diversification across 5 uncorrelated asset classes
- SMA trend filter reduces drawdowns significantly (-14.2% vs buy-and-hold's ~-30%)
- Includes real estate and commodities for inflation protection
- Backtested with 10 years of ETF data (2016–2026); original academic research spans 100+ years
- Can be partially or fully in cash during severe bear markets
Limitations
- Monthly monitoring required — more work than passive strategies
- SMA filter can generate false signals (whipsaw) in range-bound markets
- Commodities and REITs add tracking error and higher expense ratios
- Tax-inefficient due to potentially frequent switching
- Requires 5 separate ETFs — more complex than GEM or 60/40
Ideal for: Investors who want endowment-style diversification with tactical downside protection, those comfortable with monthly rebalancing, and anyone who values trend-following as a risk management tool.