Robust Asset Allocation Balanced (Alpha Architect RAA)

Wesley Gray's Robust Asset Allocation (Alpha Architect), Balanced flavor: 40% stocks, 40% real assets, and 20% Treasuries. US and international stocks are held through value and momentum funds, alongside REITs, commodities, and intermediate Treasuries. Each month two trend rules, a 12-month return above Treasury bills and a price above its 12-month average, each control half of every asset class; a failing rule moves that half to Treasury bills.

Designed by Wesley Gray (Alpha Architect), 2014. Implemented and tracked by Tactfolio.

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1×2×3×201520192023
Growth of $1, log scale. Strategy SPY. Hypothetical results on daily ETF prices with trading costs, through Sep 2026.
Dec 2015 – Sep 2026StrategySPY
Annual return (CAGR)5.2%14.9%
Worst drawdown-16.0%-33.7%
Sharpe ratio0.700.87
Volatility7.7%17.7%
Annual return since publication (Dec 2015)5.2%14.9%

Robust Asset Allocation (RAA) is Wesley Gray's model at Alpha Architect, introduced in a December 2014 blog post and the 2015 book DIY Financial Advisor by Gray, Jack Vogel, and David Foulke. The Balanced flavor holds 40% stocks, 40% real assets, and 20% Treasuries, and each month two trend rules decide how much of each asset class stays invested and how much moves to Treasury bills.

The idea#

Gray built RAA from three simple parts. First, a diversified mix of five asset classes rather than an optimized portfolio, because complex allocation models mostly fit noise. Second, value and momentum stocks in place of the broad market, because both factors have long records of higher returns. Third, trend following, because diversification alone does not prevent deep losses when most markets fall together.

The trend part uses two rules that usually agree but sometimes do not: time-series momentum (has the asset beaten Treasury bills over the past year?) and a moving average (is the price above its 12-month average?). Rather than pick one, RAA gives each rule control of half of every asset class.

How it works#

The Balanced portfolio holds five asset classes:

  • US stocks, 20%: Alpha Architect's US value fund (QVAL) and US momentum fund (QMOM), 10% each
  • International stocks, 20%: its international value (IVAL) and momentum (IMOM) funds, 10% each
  • Real estate, 20%: VNQ
  • Commodities, 20%: GSG, which tracks the GSCI index used in the source
  • Intermediate Treasuries, 20%: IEF

At the close of the last trading day of each month, each asset class is checked against two rules: its 12-month return is above that of Treasury bills (BIL), and its price is above its 12-month moving average. If both pass, the class is fully invested. If one passes, half of it moves to Treasury bills. If neither passes, all of it does. As in the source, the stock rules are read on the broad markets, SPY for US stocks and EFA for international stocks, not on the factor funds.

Alpha Architect publishes the 40/40/20 split of the Balanced flavor but not how each bucket is divided. This version splits each bucket evenly, the same pattern the source shows for its Moderate flavor. Alpha Architect's index also weights the four factor funds by their volatility; this version holds them equally.

What the backtest shows#

The test starts at the end of 2015, when the youngest of the four factor funds launched, so it covers about ten years, all after publication. Over that period RAA Balanced compounded about 5% a year. That is far behind the S&P 500 and well behind a 60/40 portfolio, and both had a better risk-adjusted return. Its one advantage was a shallower worst drawdown, about 16% against about 21% for 60/40 and about a third for the S&P 500.

Several things held it back at once. The value and momentum funds trailed the broad stock markets they replace, REITs and Treasuries had a weak decade, and the 12-month trend rules sold after declines and bought back after rebounds. In 2019 it gained 7% while the S&P 500 gained 31%, and in 2020 it lost 2% in a year the S&P 500 rose 18%.

Its worst drawdown ran from January 2018 to March 2020 and took until April 2021 to recover. The trend rules did their job in 2022, when the portfolio finished roughly flat while the S&P 500 fell 18%. Simulated history cannot take this test further back, because no reference history exists for Alpha Architect's funds.

When it struggles#

  • Markets led by large growth stocks. Value and momentum funds, and 40% in real assets, lag a narrow rally in the biggest companies.
  • Sharp V-shaped recoveries. Rules based on a year of data leave after a crash and return months after the rebound.
  • Weak real assets. REITs and commodities make up two fifths of the portfolio.

Using it on Tactfolio#

The live strategy above runs these rules with Alpha Architect's own funds and an even split inside each bucket. Copy it to use broad index funds such as SPY and EFA in place of the factor funds, or compare it with the stock-heavy Aggressive flavor.

Year by year

YearStrategySPY
2026*17.0%14.0%
20259.3%17.7%
20245.2%24.9%
20235.0%26.2%
2022-0.3%-18.2%
202114.2%28.7%
2020-1.7%18.3%
20197.4%31.2%
2018-8.4%-4.6%
201711.8%21.7%
2016-0.4%12.0%
2015*-0.1%-1.0%

* Partial year.

The rules as implemented

This is the exact tree Tactfolio runs, rebalanced monthly with signals and trades at the close. Open it to inspect or copy it.

  • StrategyRobust Asset Allocation Balanced
    • WeightSpecified
      • IfAll of 2 conditions20%
        • 252d cumulative return of SPY is above 252d cumulative return of BIL
        • current price of SPY is above 252d moving average of SPY
        Then
        • WeightEqual
          • TickerQVAL
          • TickerQMOM
        Otherwise
        • WeightEqual
          • IfAny of 2 conditions
            • 252d cumulative return of SPY is above 252d cumulative return of BIL
            • current price of SPY is above 252d moving average of SPY
            Then
            • WeightSpecified
              • WeightEqual50%
                • TickerQVAL
                • TickerQMOM
              • TickerBIL50%
            Otherwise
            • WeightEqual
              • TickerBIL
      • IfAll of 2 conditions20%
        • 252d cumulative return of EFA is above 252d cumulative return of BIL
        • current price of EFA is above 252d moving average of EFA
        Then
        • WeightEqual
          • TickerIVAL
          • TickerIMOM
        Otherwise
        • WeightEqual
          • IfAny of 2 conditions
            • 252d cumulative return of EFA is above 252d cumulative return of BIL
            • current price of EFA is above 252d moving average of EFA
            Then
            • WeightSpecified
              • WeightEqual50%
                • TickerIVAL
                • TickerIMOM
              • TickerBIL50%
            Otherwise
            • WeightEqual
              • TickerBIL
      • IfAll of 2 conditions20%
        • 252d cumulative return of VNQ is above 252d cumulative return of BIL
        • current price of VNQ is above 252d moving average of VNQ
        Then
        • WeightEqual
          • TickerVNQ
        Otherwise
        • WeightEqual
          • IfAny of 2 conditions
            • 252d cumulative return of VNQ is above 252d cumulative return of BIL
            • current price of VNQ is above 252d moving average of VNQ
            Then
            • WeightSpecified
              • TickerVNQ50%
              • TickerBIL50%
            Otherwise
            • WeightEqual
              • TickerBIL
      • IfAll of 2 conditions20%
        • 252d cumulative return of GSG is above 252d cumulative return of BIL
        • current price of GSG is above 252d moving average of GSG
        Then
        • WeightEqual
          • TickerGSG
        Otherwise
        • WeightEqual
          • IfAny of 2 conditions
            • 252d cumulative return of GSG is above 252d cumulative return of BIL
            • current price of GSG is above 252d moving average of GSG
            Then
            • WeightSpecified
              • TickerGSG50%
              • TickerBIL50%
            Otherwise
            • WeightEqual
              • TickerBIL
      • IfAll of 2 conditions20%
        • 252d cumulative return of IEF is above 252d cumulative return of BIL
        • current price of IEF is above 252d moving average of IEF
        Then
        • WeightEqual
          • TickerIEF
        Otherwise
        • WeightEqual
          • IfAny of 2 conditions
            • 252d cumulative return of IEF is above 252d cumulative return of BIL
            • current price of IEF is above 252d moving average of IEF
            Then
            • WeightSpecified
              • TickerIEF50%
              • TickerBIL50%
            Otherwise
            • WeightEqual
              • TickerBIL

Sources and caveats

  • The 40% equities / 40% real assets / 20% bonds split of the Balanced flavor is from the source; the split inside each bucket is not published and is inferred here as even: US and international stocks equally, each split equally between value and momentum, and real assets equally between REITs and commodities. The Moderate flavor, the only one the source details, uses the same pattern.
  • Alpha Architect's own funds QVAL, QMOM, IVAL, and IMOM hold its US and international value and momentum indexes. The source weights the four by volatility, rebalanced yearly; this version holds each region at half the equity weight, split equally between value and momentum, rebalanced monthly. Allocate Smartly instead uses IWD, MTUM, EFV, and EFA. IMOM and QMOM began trading in December 2015, which limits the backtest.
  • As in the source, the equity trend rules read the passive benchmarks, SPY for US stocks and EFA for international stocks. VNQ, GSG (the GSCI, as in the source), and IEF (7–10 year Treasuries) are the other asset classes; BIL is Treasury bills.
  • Each rule governs half of an asset class: with both passing it is fully held, with one passing half moves to Treasury bills, and with none all of it does. The moving average is the daily 252-session average rather than an average of 12 month-end prices.
  • Signals and trades use the close of the last trading day of each month, as in the source.

Common questions#

What is Robust Asset Allocation?#

It is Wesley Gray's trend-following model at Alpha Architect. It holds US and international value and momentum stocks, REITs, commodities, and Treasuries, and two 12-month trend rules each decide whether half of an asset class stays invested or moves to Treasury bills.

What ETFs does RAA Balanced use?#

QVAL, QMOM, IVAL, and IMOM for stocks, VNQ for real estate, GSG for commodities, IEF for Treasuries, and BIL for Treasury bills. The stock trend signals are read on SPY and EFA. Allocate Smartly's version uses IWD, MTUM, EFV, and EFA as the stock funds.

What is the difference between RAA Balanced, Moderate, and Aggressive?#

Only the mix: Balanced is 40% stocks, 40% real assets, and 20% bonds; Moderate is 60/20/20; Aggressive is 80/10/10. The trend rules are the same in all three.

Is Robust Asset Allocation the same as Keller's Resilient Asset Allocation?#

No. Wouter Keller's Resilient Asset Allocation shares the abbreviation RAA but is a different model that switches on the unemployment rate and momentum signals.