QTAA Paper Update: Alt Cash Strategies 9/10

Below we have updated our 2006 white paper.  While you can download the full 70+ page paper here, I’ve also chopped it up into a series of more digestible posts for the blog.  



On average the tactical portfolio is invested in 30% cash.  This is a drag on the portfolio, and many investors employ other means to increase the yield on the cash portion of the portfolio using any number of funds or concepts.  Below we look at a simple method of taking on more duration risk by investing the portfolio in 10 year government bonds instead of Treasury Bills. 


Figure 19: Buy and Hold and GTAA Portfolios, 1973-2012



An investor would have realized an additional 1.37% per annum in returns for marginally more volatility and drawdown – but how much of this is simply due to the major bull market in bonds?  We decided to examine a period of sharply rising interest rates from 1973-1981, and found that the benefit of taking on additional duration risk actually helped!


Figure 19: Buy and Hold and GTAA Portfolios, 1973-2012