HAA vs BAA: Keller's Two Best Canary Strategies Compared
Wouter Keller has published dozens of tactical asset allocation strategies over the past decade, but two stand above the rest in terms of practical adoption and research influence: Bold Asset Allocation (BAA) and Hybrid Asset Allocation (HAA). Both use canary signals to detect market regime shifts, both rotate between offensive and defensive assets, and both have delivered strong risk-adjusted returns through multiple market crises. Yet they differ in fundamental ways — in architecture, complexity, and the trade-offs they impose on investors.
This article is a head-to-head comparison grounded in backtest data spanning 2008 through mid-2026. The goal is not to declare a winner but to map the structural differences that produce divergent return profiles, and to help investors decide which approach fits their temperament and objectives. HAA posted a 10.43% CAGR with a -9.29% maximum drawdown. BAA-B returned 9.01% with a -10.35% drawdown. Those headline numbers tell only part of the story.
Understanding why these two strategies behave differently requires examining how each one detects danger, selects assets, and manages the transition between offense and defense. The details matter more than the summaries.
How HAA Works
Hybrid Asset Allocation was published by Keller and Keuning in 2023 (SSRN #4346906). It is a deliberate simplification — a response to the complexity of earlier canary models. HAA strips the crash-detection mechanism down to a single asset: TIP (Treasury Inflation-Protected Securities). When TIP's 13612W momentum score is positive, the portfolio goes offensive. When it turns negative, the entire portfolio shifts to IEF (intermediate-term Treasuries).
The TIP Canary
Using a single canary asset is a bold design choice. Most tactical systems use multiple signals to reduce false positives, but HAA bets that TIP captures the intersection of inflation expectations and real rates — two forces that together reflect the market's risk appetite. A declining TIP signals either rising real rates (tightening conditions) or collapsing inflation expectations (deflationary stress). Both are environments where equities tend to struggle.
The simplicity carries a cost: a single-asset canary has no redundancy. If TIP sends a false signal — a brief dip driven by idiosyncratic bond market dynamics rather than a genuine regime shift — HAA responds to it regardless. But the backtest evidence suggests TIP's signal has been remarkably clean, triggering defensive shifts ahead of every major drawdown since 2007.
Per-Asset Absolute Momentum Filter
When the canary is positive and HAA goes offensive, it does not blindly buy all available assets. Each of the eight offensive candidates (SPY, IWM, VEA, VWO, VNQ, DBC, GLD, TLT) must pass an individual absolute momentum filter. Assets with negative momentum are excluded, and the portfolio selects the top 4 from whatever passes. This layered approach — canary first, then per-asset screening — creates a double filter that keeps the portfolio away from assets in established downtrends even during broadly offensive regimes.
Defensive Posture
When the canary turns negative, HAA moves entirely into IEF. There is no partial allocation, no blending of offense and defense. The binary nature of this switch is both a strength (decisive risk reduction) and a limitation (no nuance in the degree of defensiveness).
How BAA Works
Bold Asset Allocation was published by Keller in 2022 (SSRN #4166845), a year before HAA. It is the more complex of the two — a system built on multiple layers of signal processing and a broader investment universe.
Four-Asset Canary
BAA uses four canary assets: VWO (emerging market equities), BND (total bond market), TIP (inflation-protected Treasuries), and DBC (commodities). The canary signal fires when any of these four assets shows negative 13612W momentum. The use of four canaries drawn from different asset classes creates a breadth-based early warning system: the probability of all four staying positive during genuine market stress is low, so BAA tends to detect danger early.
The trade-off is sensitivity. With four canaries, the odds of at least one flashing negative at any given time are higher than with a single canary. BAA spends more time in defensive mode than HAA, which directly explains part of the return differential between the two strategies.
Dual-Speed Momentum
BAA employs two momentum calculations for different purposes. A fast 13612W composite score serves as the crash-detection signal (applied to the canary assets). A slower 13-month SMA ratio handles offensive asset ranking. This dual momentum architecture separates the "when to run" decision from the "where to invest" decision, allowing each to operate on an appropriate timescale.
Broader Universe
BAA-B selects the top 6 from 12 offensive assets — a universe 50% larger than HAA's 8. On the defensive side, BAA draws from a 7-asset safe-haven universe rather than parking everything in a single bond ETF. This diversification within both offensive and defensive postures gives BAA more degrees of freedom, which contributes to its lower volatility (8.13% vs HAA's 9.07%) but also introduces more complexity in the selection process.
Head-to-Head Performance
The following table presents the core metrics for both strategies over the full backtest period.
| Metric | HAA-B | BAA-B |
|---|---|---|
| CAGR | 10.43% | 9.01% |
| Max Drawdown | -9.29% | -10.35% |
| Sharpe Ratio | 1.14 | 1.11 |
| Sortino Ratio | 1.74 | 1.92 |
| Calmar Ratio | 1.12 | 0.87 |
| Volatility | 9.07% | 8.13% |
| Win Rate | 65.2% | 65.2% |
| Best Month | +9.50% | +7.98% |
| Worst Month | -7.50% | -6.34% |
| Best Year | +23.82% (2021) | +20.43% (2008) |
| Worst Year | -3.01% (2015) | -1.15% (2024) |
HAA leads on raw return (10.43% vs 9.01%), Sharpe ratio (1.14 vs 1.11), and Calmar ratio (1.12 vs 0.87). BAA leads on Sortino ratio (1.92 vs 1.74) and volatility (8.13% vs 9.07%). The identical win rates — 65.2% for both — suggest that the return difference comes not from how often each strategy is right, but from how much it captures when it is right.
Cumulative Growth Divergence
The period return data makes the compounding gap visible. Over one year, HAA returned +34.31% against BAA's +26.59% — a significant lead. Over three years, the gap widens: +46.93% versus +26.63%. Over ten years, HAA delivered +220.61% versus BAA's +121.39%. That is not a marginal difference; it reflects fundamentally different exposure profiles compounding over time.
Annual Return Comparison
| Year | HAA-B | BAA-B | Difference |
|---|---|---|---|
| 2008 | +9.81% | +20.43% | -10.62% |
| 2009 | +13.54% | +14.76% | -1.22% |
| 2010 | +19.80% | +15.52% | +4.28% |
| 2011 | +2.69% | +6.67% | -3.98% |
| 2012 | +11.72% | +8.98% | +2.74% |
| 2013 | +9.15% | +7.16% | +1.99% |
| 2014 | +1.53% | +7.94% | -6.41% |
| 2015 | -3.01% | +0.09% | -3.10% |
| 2016 | +12.33% | +5.75% | +6.58% |
| 2017 | +14.34% | +13.50% | +0.84% |
| 2018 | +6.65% | +7.27% | -0.62% |
| 2019 | +7.28% | +10.34% | -3.06% |
| 2020 | +21.45% | +18.24% | +3.21% |
| 2021 | +23.82% | +7.42% | +16.40% |
| 2022 | +3.67% | +1.39% | +2.28% |
| 2023 | +8.83% | +4.34% | +4.49% |
| 2024 | +1.15% | -1.15% | +2.30% |
| 2025 | +13.99% | +9.31% | +4.68% |
| 2026 YTD | +17.38% | +10.58% | +6.80% |
A pattern emerges from the year-by-year data. BAA outperformed HAA in the early years (2008-2009, 2011, 2014-2015, 2018-2019) — periods characterized by elevated macro uncertainty where BAA's multi-canary defensiveness paid off. HAA has dominated from 2020 onward, posting larger gains in strong equity years and smaller losses in weak ones. The 2021 gap is striking: HAA returned +23.82% while BAA managed only +7.42%. That single year accounts for much of the long-term compounding difference.
Crisis Performance
The real test of any tactical allocation strategy is how it behaves when markets break down. Both HAA and BAA were designed to protect capital during crises, and both have delivered on that promise — but through different mechanisms and with different results.
| Crisis | HAA-B | BAA-B |
|---|---|---|
| GFC 2008 (full year) | +9.81% | +20.43% |
| GFC peak-to-trough (Nov 07 - Feb 09) | +2.26% | +11.72% |
| COVID crash (Feb - Mar 2020) | +2.99% | +4.87% |
| Rate Shock 2022 | +3.67% | +1.39% |
| Tariff Shock 2025 | -2.02% | -3.60% |
BAA dominated during the Global Financial Crisis — its best single-year return of +20.43% came in 2008, and it gained +11.72% through the full peak-to-trough period while the S&P 500 lost roughly half its value. HAA was positive too (+9.81% in 2008, +2.26% peak-to-trough), but the gap is substantial. BAA's multi-asset defensive universe — seven safe-haven assets to choose from — allowed it to find strong-performing bonds during a period when flight-to-quality was extreme.
The COVID crash tells a similar story: BAA gained +4.87% while HAA gained +2.99%. Both avoided the drawdown, but BAA's defensive diversification again provided a larger cushion.
The 2022 rate shock reversed the pattern. When bonds and equities fell simultaneously, BAA's bond-heavy defensive universe became a liability rather than a strength. HAA's simpler IEF-only defense held up better, returning +3.67% versus BAA's +1.39%. The 2025 tariff shock hurt both strategies, but HAA lost less (-2.02% vs -3.60%).
The takeaway: BAA is the superior crisis fighter when bonds work as intended (flight-to-quality events). HAA is more resilient when the crisis itself is driven by bond market dysfunction.
Risk-Adjusted Analysis
Raw returns favor HAA. But risk-adjusted metrics paint a more nuanced picture.
HAA's Sharpe ratio of 1.14 versus BAA's 1.11 reflects the return advantage outweighing the slightly higher volatility (9.07% vs 8.13%). Both are excellent — a Sharpe above 1.0 over a multi-decade backtest is uncommon for any asset allocation strategy.
BAA's Sortino ratio of 1.92, however, is meaningfully higher than HAA's 1.74. The Sortino ratio penalizes only downside volatility, and BAA's lower worst month (-6.34% vs -7.50%) and narrower loss distribution give it the edge here. BAA captures a larger share of its total volatility on the upside. For investors who care more about avoiding bad months than maximizing good ones, this distinction matters.
The Calmar ratio — CAGR divided by maximum drawdown — strongly favors HAA at 1.12 versus 0.87. Despite BAA's crisis-fighting reputation, its maximum drawdown of -10.35% is actually worse than HAA's -9.29%, while its CAGR is lower. HAA delivers more return per unit of peak-to-trough pain.
Structural Differences That Explain the Divergence
The performance gap between HAA and BAA is not random. It flows directly from three architectural decisions.
Canary Sensitivity and Time in Market
HAA's single TIP canary fires less frequently than BAA's four-asset canary. With four canaries, BAA needs all four to show positive momentum before going fully offensive — a higher bar. This means BAA spends more months in partial or full defense, which reduces both upside capture and downside exposure. In trending bull markets (2016-2017, 2020-2021, 2025-2026), this conservative posture costs BAA significant returns. In choppy, uncertain environments (2011, 2014-2015, 2018-2019), it provides a smoother ride.
Concentration vs Diversification
HAA holds its top 4 of 8 offensive assets — a 50% concentration ratio. BAA holds its top 6 of 12 — also 50% by count, but drawn from a broader universe. The narrower HAA universe includes assets like GLD and TLT that can act as offensive holdings with defensive characteristics, giving HAA a natural hedge even in its aggressive posture. BAA's broader universe provides more diversification but also more noise in the selection process.
Defensive Architecture
This is the most consequential difference. HAA parks everything in IEF when the canary turns negative. BAA distributes across seven safe-haven assets using momentum ranking. In a normal recession (equities fall, bonds rally), BAA's approach is superior — it captures the bond rally across multiple instruments. In a correlated selloff (2022's simultaneous equity and bond decline), BAA's defensive portfolio suffers alongside its offensive one, while HAA's single-instrument defense at least limits the damage surface.
When to Choose HAA
HAA suits investors who prioritize simplicity, higher expected returns, and are comfortable with a system that relies on a single signal. The data shows HAA outperforms in strong equity environments and in crises where traditional bond diversification fails. Its Calmar ratio of 1.12 means it historically delivers more return per unit of maximum drawdown — a metric that matters deeply for investors who measure pain in absolute terms.
HAA is also easier to implement. Eight offensive assets and one defensive asset means fewer trades, lower transaction costs, and less complexity to monitor. For investors who follow trend-following principles and want a clean, transparent system, HAA's architecture is attractive.
The risk: a single canary signal has no backup. If TIP behaves anomalously — disconnecting from the macro environment it is supposed to reflect — HAA has no second opinion to rely on.
When to Choose BAA
BAA suits investors who prioritize downside protection, are willing to accept lower returns for smoother outcomes, and value the redundancy of multiple signal sources. BAA's Sortino ratio of 1.92 — the highest of either strategy — indicates superior downside risk management. Its GFC performance (+20.43% in 2008, +11.72% peak-to-trough) is among the best of any published tactical strategy.
BAA is the better choice for investors who believe the next major crisis will resemble 2008 more than 2022 — a flight-to-quality event where government bonds and safe-haven assets rally sharply. Its multi-canary architecture provides early warning across asset classes, and its dual-speed momentum system separates crash detection from asset selection in a theoretically sound way.
The cost: BAA's conservatism has dragged on returns since 2020, and its complexity creates more opportunities for implementation error. Past performance does not guarantee future results, but the structural reasons for BAA's underperformance in recent years — excessive defensive time during a strong equity cycle — are identifiable and may or may not persist.
The Case for Both
HAA and BAA are not mutually exclusive. Their return profiles are different enough that combining them in a portfolio blend can improve risk-adjusted outcomes. HAA's strength in trending markets complements BAA's strength in crisis environments. In years where HAA struggled (2008, 2011, 2014), BAA provided significant offset, and vice versa (2021, 2023, 2025).
A simple equal-weight blend of HAA-B and BAA-B would have delivered a CAGR somewhere between 9.01% and 10.43%, with a maximum drawdown likely lower than either strategy alone due to the diversification of signal regimes. This is a common approach among tactical investors who recognize that no single canary architecture dominates across all environments.
How to Explore This on PortfolioWiser
Both HAA and BAA are available for detailed analysis on the platform. The Strategy Library provides full backtest reports for each strategy, including monthly return heatmaps, drawdown charts, allocation history, and rolling performance metrics. Every number cited in this article can be verified and explored interactively.
The Scenarios tool allows side-by-side comparison of HAA and BAA under different market conditions and parameter configurations. Investors can adjust canary sensitivity, change defensive assets, or modify the number of offensive holdings to see how each lever affects outcomes — providing a deeper understanding of the structural dynamics discussed above.
Conclusion
HAA and BAA represent two distinct philosophies within Keller's canary-based framework. HAA bets on simplicity and signal clarity, using a single canary and a concentrated offensive portfolio to maximize returns when conditions are favorable. BAA bets on redundancy and diversification, using four canaries, dual-speed momentum, and broad defensive options to minimize the worst outcomes.
The data favors HAA on return and Calmar ratio. It favors BAA on downside volatility and crisis resilience in traditional flight-to-quality events. Neither is unconditionally superior. The right choice depends on whether an investor fears missing the upside more than experiencing the downside — and on what kind of crisis they expect to face next.
Both strategies have delivered positive returns through every major market dislocation since 2007. Both have maintained Sharpe ratios above 1.0. Both have kept maximum drawdowns below 11%. In a landscape of tactical allocation strategies, that consistency places them in rare company.