Ivy Portfolio - Rotation
Ivy Portfolio - Rotation is a concentrated momentum strategy derived from research by Meb Faber of Cambria Investment Management, drawing on two of his papers: A Quantitative Approach to Tactical Asset Allocation and Relative Strength Strategies for Investing. It applies a relative strength ranking to five globally diversified asset classes, rotating 100% of the portfolio into whichever single asset class has the strongest recent momentum.
Average Allocation
Based on historical average weights across all rebalance periods.
Performance Snapshot
Rolling Returns
| Period | Low | Average | High |
|---|---|---|---|
| 1 Year | -21.0% | +13.4% | +67.6% |
| 3 Year | -2.0% | +13.2% | +31.6% |
| 5 Year | +1.3% | +13.2% | +27.4% |
| 10 Year | +5.4% | +12.8% | +19.1% |
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.
Investment Philosophy
The strategy is built on the well-documented observation that assets which have recently outperformed tend to continue outperforming over the near term — a phenomenon known as momentum or relative strength. Rather than holding all five asset classes simultaneously, this rotation system concentrates entirely in the current leader, aiming to capture the bulk of returns from whichever asset class is in a sustained uptrend. Faber's research shows the relative strength approach outperforms a buy-and-hold benchmark in roughly 70% of all years across multiple measurement periods and time horizons.
Who It's For
Suited for return-seeking investors with high risk tolerance who understand that concentration is the price of outperformance. This is not a portfolio for the faint-hearted — being 100% in a single asset class means the ride can be extremely volatile, and the strategy demands monthly discipline to execute signals without second-guessing.
Pros
- Momentum is one of the most robust and persistent factors in academic and practitioner research, working across asset classes and time periods
- Full concentration in the top-ranked asset maximizes exposure to the strongest prevailing trend
- Simple, rules-based ranking removes emotion and discretion from allocation decisions
Cons
- 100% concentration in a single asset class produces high volatility and the potential for severe drawdowns — the strategy is fully exposed to whatever beta it happens to be holding
- Momentum strategies are vulnerable to sharp reversals; sudden shifts in market leadership can result in buying near a peak and rotating out near a trough
- High turnover has meaningful tax consequences — Faber estimates annual turnover as high as 378% for a single-asset rotation system, making a tax-deferred account essentially mandatory
Technical Notes
Each month, five asset classes — US equities (S&P 500), foreign developed equities (MSCI EAFE), US 10-year government bonds, commodities (GSCI), and REITs (NAREIT) — are ranked by trailing total return. Faber's research uses an average of 1, 3, 6, 9, and 12-month returns to smooth the ranking signal and reduce sensitivity to any single lookback period. The entire portfolio rotates into the top-ranked asset at the monthly close. There is no trend or cash filter — the portfolio is always fully invested in whichever asset currently ranks first.
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