Vigilant Asset Allocation - G12

The Vigilant Asset Allocation G12 is a quantitative momentum strategy developed by Wouter Keller and Jan Willem Keuning, published in their research paper "Breadth Momentum and the Canary Universe: Defensive Asset Allocation" and available through SSRN. The G12 version applies Keller and Keuning's Vigilant Asset Allocation (VAA) framework across a universe of twelve assets — including global equity indices, real estate, corporate bonds, and government bonds — using a momentum scoring system combined with a "canary" indicator that signals when to shift the portfolio into defensive safe-haven assets.

Investment Philosophy

Vigilant Asset Allocation is designed around the observation that aggressive trend-following — using very responsive momentum signals — combined with a breadth-based crash protection mechanism can significantly reduce drawdowns while capturing strong risk-adjusted returns in trending markets. The "canary" universe is a subset of assets whose momentum deterioration signals broad market weakness, prompting a shift toward cash or short-term government bonds well before the full portfolio would otherwise be affected. The G12 breadth of risky assets provides diverse exposure to the momentum signal.

Who It's For

This strategy is suited to quantitatively minded, self-directed investors who are comfortable implementing and monitoring a rules-based tactical system with monthly evaluation and potential rebalancing. It requires familiarity with momentum scoring methodology and the discipline to act on signals mechanically without discretionary override.

Pros

• Canary-based crash protection mechanism aims to shift to defensive assets well before major bear markets develop
• Broad twelve-asset universe diversifies the momentum signal across multiple markets
• Fully systematic approach removes emotional bias from allocation decisions

Cons

• Complex implementation requires monthly data collection and momentum scoring across twelve assets
• Can produce frequent short-term whipsaw signals in volatile markets
• Aggressive trend-following can result in holding cash during early stages of equity bull markets, reducing long-run returns

Technical Notes

Keller and Keuning publish updated research and parameter details on SSRN. The strategy requires monthly momentum scoring across all twelve assets and the canary universe, with rebalancing when the top-ranked assets or the defensive signal changes.