Diversified GEM Dual Momentum

The Diversified GEM Dual Momentum portfolio extends Gary Antonacci's Global Equity Momentum (GEM) framework beyond its original three-asset model to cover a broader set of asset classes. Antonacci, who introduced dual momentum in his book Dual Momentum Investing, developed GEM using just US equities, international equities, and bonds. The diversified variant expands the opportunity set to include equity REITs, mortgage REITs, credit instruments, and stress assets such as gold and long-term treasuries -- each evaluated through the same dual-momentum lens.

Investment Philosophy

Dual momentum combines two forms of momentum: relative momentum (choosing the strongest-performing asset among a set of candidates) and absolute momentum (avoiding assets in a downtrend by switching to defensive holdings when an asset's trailing return is negative). The diversified extension organises these assets into modules -- typically covering equity risk, credit risk, real estate, and economic stress -- and applies the dual-filter mechanism within each. The premise is that momentum is a robust and persistent anomaly across asset classes, and that a broader opportunity set captures more of the available return while improving diversification of the momentum signal itself.

Who It's For

This portfolio suits investors comfortable with a rules-based, trend-following approach that results in meaningful but infrequent portfolio shifts. It requires conviction in the momentum factor and the discipline to follow signals mechanically, even when the suggested positioning feels counterintuitive. A medium-to-long time horizon is appropriate.

Pros

• Extends the proven dual momentum framework across a more complete set of asset classes
• Absolute momentum signal acts as a crash filter, moving to defensive assets during prolonged downturns
• Modular structure provides diversified exposure to the momentum signal across different risk types

Cons

• More complex to manage than static portfolios due to ongoing momentum signal monitoring across multiple modules
• Trend-following strategies can suffer in choppy, trendless markets with frequent whipsaw signals
• Adding more asset classes increases data requirements and the risk of overfitting the model to historical returns

Technical Notes

Like the standard GEM model, this strategy is typically evaluated monthly. The multi-module structure means positions can shift within any module independently, and overall portfolio turnover depends heavily on how many modules are signaling defensive positioning at any given time.