Hybrid Asset Allocation — Simple (HAA-S)
Developed by Keller & Keuning · Canary + Dual Momentum · High Risk
The Simple variant of Hybrid Asset Allocation strips the HAA framework to its most minimal expression: a single offensive asset (US equities), a single canary (TIP), and a binary allocation decision. Published alongside the balanced variant in Keller and Keuning's 2023 SSRN paper (#4346906), HAA-S was designed to answer a specific question: how much of HAA's risk-adjusted performance comes from the multi-asset diversification of the balanced variant, and how much comes from the TIP canary signal itself?
The answer proved instructive. HAA-S, despite holding only SPY as its offensive position, delivers surprisingly strong risk-adjusted returns — demonstrating that the TIP canary alone provides substantial protective value independently of the portfolio's composition. This finding validated the TIP momentum signal as a genuine macro timing indicator rather than a statistical artifact of multi-asset diversification.
The strategy's mechanics are radically simple. Each month, TIP is scored using the 13612U composite. If positive, SPY is checked using the same composite. If both are positive, the portfolio holds 100% SPY. If either is negative, the portfolio shifts entirely to the better-performing of intermediate bonds (IEF) or short-term Treasuries (BIL). This two-gate decision tree can be evaluated in under a minute per month and requires no ranking, optimization, or complex calculation.
The simplicity is deliberate. HAA-S serves both as a standalone strategy for investors who want minimal-effort tactical allocation on US equities and as a building block within multi-strategy portfolios where its concentrated US equity exposure and decisive TIP-based switching provide a specific risk-return profile that complements more diversified components. Its high correlation with US equity markets during bull phases and rapid exit during macro deterioration make it particularly useful as an aggressive satellite allocation paired with lower-correlation strategies.
How It Works
The Two-Gate Decision
The monthly decision process evaluates two conditions sequentially. First, TIP's 13612U composite (the average of one, three, six, and twelve-month returns) is checked. If negative, the portfolio immediately shifts to defensive mode without evaluating SPY — the macro environment is considered hostile regardless of how US equities are performing. If TIP's score is positive, the strategy proceeds to evaluate SPY's 13612U composite. If SPY is also positive, the portfolio holds 100% SPY. If SPY is negative despite a positive TIP reading, the portfolio shifts to defense.
This sequential evaluation means the TIP canary acts as a fast macro gate that can override SPY's own momentum. During the 2022 rate shock, for example, TIP momentum turned negative before SPY's twelve-month return went negative, allowing the strategy to exit equities earlier than a strategy relying solely on SPY's own trend signals.
Defensive Asset Selection
When either gate triggers defensive mode, the portfolio shifts entirely to the best-performing of two safe-haven options — intermediate bonds (IEF) or short-term Treasuries (BIL) — selected by their 13612U composite scores. This dynamic defensive selection adapts to the rate environment: during periods of falling rates, IEF's longer duration produces positive momentum and is selected; during periods of rising rates, BIL's minimal duration protects capital and is selected instead.
The binary all-or-nothing allocation means the portfolio experiences large discrete transitions between 100% equities and 100% safe-haven assets. There is no partial positioning or gradual transition. This decisive switching maximizes the protective benefit when the canary signal is correct but produces full-portfolio whipsaw costs when the signal generates a false alarm. The net result over time depends on the reliability of the TIP canary — which has historically proven effective at identifying genuine macro regime changes.
Single-Asset Concentration
By holding only SPY during risk-on periods, HAA-S accepts the full volatility and drawdown risk of the US equity market in exchange for maximum simplicity and the full benefit of US equity bull markets. There is no diversification across equity regions, no alternative asset exposure, and no optimization — the portfolio is simply long the S&P 500 when macro conditions are favorable and in safe havens when they are not.
This concentrated approach produces a return profile that closely tracks the S&P 500 during bull markets while potentially diverging significantly during transitional periods. The strategy's value-add comes entirely from its timing: entering equities when TIP and SPY momentum are both positive and exiting when either deteriorates. Investors using HAA-S should understand that they are essentially making a macro-timed bet on US equities with a TIP-based regime filter — not building a diversified all-weather portfolio.
Explore Hybrid Asset Allocation — Simple (HAA-S)
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