Tactical asset allocation funds: their development and advantages

TAA FUNDS

Aviva's Adrian Jarvis looks at the benefits of tactical asset allocation funds

Since the 1950s, investors have understood and accepted the need for strategic (long-term) asset allocation (SAA) and have created diversified portfolios to maximise risk-adjusted returns over the long term. SAA involves the creation of an optimal ‘base’ or ‘benchmark’ portfolio followed by a series of continuous, yet relatively infrequent and (in normal market environments, minor) refinements to that portfolio. The aim being, via the periodic adjustments, to maintain a portfolio that is best suited to a client’s long-term risk-reward objectives. What is TAA? Less well understood, howev...