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Multi-Asset Investing: A practical guide to modern portfolio management by Yoram Lustig

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13. Tactical Asset Allocation

Tactical Asset Allocation (TAA) is the process of deviating from the weights of SAA with the goals of enhancing performance through benefiting from relative value and market opportunities, and mitigating and managing risks. TAA is a risk management tool since it can quickly and efficiently alter the asset allocation to control the exposure to different risks.

Without any short-term views, the default, neutral positioning for portfolios is SAA. SAA is the portfolio’s long-term investment strategy. TAA is optional and portfolios should have no deviations from SAA without investor views to support such deviations. If TAA managers have no forecasting ability, the best approach is sticking with SAA and not including ...

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