Vigilant Asset Allocation - G4 Aggressive
Vigilant Asset Allocation G4 Aggressive (VAA-G4) is a concentrated momentum strategy developed by Dr. Wouter Keller and Jan Willem Keuning, published in their 2017 paper Breadth Momentum and Vigilant Asset Allocation on SSRN. The G4 refers to the four-asset offensive universe at the strategy's core; "aggressive" signals the variant that concentrates 100% of capital in a single top-ranked asset each month.
Investment Philosophy
VAA-G4 is built on a simple premise: in healthy markets, concentrate aggressively into the best-performing global asset class. When any part of the offensive universe shows negative momentum, retreat fully into defensive assets. The strategy treats negative breadth across even one offensive asset as a warning signal serious enough to trigger a complete defensive posture -- a more sensitive trip wire than most tactical strategies use. This binary, all-or-nothing approach is what gives the strategy its distinctive crash-protection profile.
Who It's For
Built for quantitatively disciplined investors with long time horizons who can handle holding 100% of their portfolio in a single asset class and following mechanical signals without override. This is not a strategy for investors who find concentration uncomfortable or who are likely to second-guess the model. Those seeking the same VAA framework with more diversification should consider Vigilant Asset Allocation G12.
Pros
- Powerful crash-protection mechanism triggered by negative breadth across offensive assets
- Simple, mechanical rules with no subjective judgment required
- Small asset universe makes monthly monitoring straightforward
- Responsive momentum formula reacts quickly to changing market conditions
Cons
- 100% concentration in a single asset each month is psychologically demanding
- High turnover generates short-term capital gains -- poorly suited to taxable accounts
- Whipsaw risk during volatile sideways markets
- Simultaneous equity and bond drawdowns can limit the effectiveness of defensive assets
Technical Notes
The momentum score formula weights recent performance heavily: 12 times the 1-month return, 4 times the 3-month return, 2 times the 6-month return, and 1 times the 12-month return. The portfolio switches between offensive (risk-on) and defensive (risk-off) assets depending on whether all four offensive assets show positive scores. Monthly rebalancing in a tax-advantaged account is strongly recommended. For a related strategy from the same authors, see Vigilant Asset Allocation G12. For a strategy with similar momentum principles and broader diversification, see Generalized Protective Momentum.
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Average Allocation
Based on historical average weights across all rebalance periods.
Performance Snapshot
Rolling Returns
| Period | Low | Average | High |
|---|---|---|---|
| 1 Year | -13.1% | +17.4% | +81.7% |
| 3 Year | -3.6% | +16.8% | +51.7% |
| 5 Year | -0.3% | +16.7% | +41.4% |
| 10 Year | +3.1% | +17.2% | +31.0% |
Growth of $10,000
Historical Drawdown
Percentage decline from the portfolio's peak value at each point in time.
Rolling Returns
Annualised return for each rolling period ending on that date.
Annualised return for each 1Y period ending on that date.