Adaptive Asset Allocation: A Primer

Resolve Asset Management

Adam Butler

Research

32 Pages

ReSolve Asset Management explores adaptive asset allocation and why traditional portfolio optimization often breaks under changing market conditions. The paper argues that shorter term signals around momentum, volatility, and correlation can create more resilient portfolios, challenging static allocation models still widely used across institutional investing.

Key Takeaways

Optimization Sensitivity: A minimum variance portfolio from 2009 to 2014 allocated 78% to bonds and just 22% to equities, highlighting how small assumptions can distort allocations.
Momentum Filtering: Selecting the top 5 assets using 6 month momentum improved diversification dynamics versus equal weight portfolios, especially during weaker market environments.
Risk Targeting Benefits: A 10% target volatility portfolio generated roughly 12% returns in the example frontier analysis, suggesting adaptive risk controls may improve portfolio efficiency.
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