Global Tactical — Aggressive Top 3 (GTAA-AGG3)
Developed by Meb Faber · Trend Following · High Risk
The Aggressive Top 3 variant is the most concentrated strategy in Meb Faber's Global Tactical family. Published as part of his broader GTAA research (SSRN #962461), GTAA-AGG3 applies the same multi-period momentum scoring and trend filtering as the thirteen-asset variant but narrows the final portfolio to just three positions — each receiving roughly thirty-three percent of capital. This concentration amplifies the impact of the momentum signal in both directions: when the ranking is correct, returns are substantially higher than broader variants; when timing is poor, drawdowns are proportionally deeper.
The twelve-asset universe from which the top three are drawn includes US large caps, momentum factor stocks, small-cap value, international developed and emerging markets, and a range of fixed income instruments spanning intermediate and long-term Treasuries, investment-grade and high-yield corporate bonds, international bonds, and emerging market debt. The inclusion of momentum factor stocks (MTUM) and small-cap value (IWN) alongside broad market indices gives the strategy access to style-specific trends that the five and thirteen-asset variants miss. The bond-heavy composition of the universe means the strategy can concentrate in fixed income during equity bear markets, providing a natural defensive capability even without an explicit defensive switching mechanism beyond the trend filter.
The three-position concentration means each asset represents a third of the portfolio, creating significant exposure to individual asset class movements. During strong directional trends, this concentration produces returns that can substantially exceed what the six-position or all-asset variants deliver. During transitions between regimes — when leadership rotates and the momentum signal is least reliable — the same concentration amplifies losses from timing errors. This makes GTAA-AGG3 the most aggressive and highest-volatility option in the Faber trend-following family.
How It Works
Scoring and Filtering
All twelve assets are scored monthly using the composite momentum formula that averages one-month, three-month, six-month, and twelve-month total returns. Each asset must also pass a ten-month simple moving average trend filter to be eligible for selection. Assets trading below their moving average are excluded regardless of their momentum rank.
The trend filter serves as a coarse safety mechanism: it prevents the portfolio from holding assets in clearly established downtrends, even if a temporary bounce has produced a positive short-term return. This dual screening — momentum ranking for selection plus trend confirmation for eligibility — means the portfolio only holds assets that are both relatively strong and in absolute uptrends.
Concentrated Selection
From the qualifying pool, the top three by composite momentum score receive equal allocation at approximately thirty-three percent each. This narrow selection concentrates capital in whatever asset classes are leading most decisively, producing a portfolio that looks very different from month to month as market leadership shifts.
During equity bull markets, the top three positions are typically dominated by equity-related assets — US large caps, momentum factor stocks, and emerging markets. During bond rallies, fixed income instruments displace equities in the rankings. During commodity supercycles, DBC and related assets enter the top three. This adaptability is the primary advantage of the momentum-driven approach — but the three-position limit means the portfolio has no diversification buffer when the ranking produces suboptimal selections.
Risk and Turnover Profile
The concentrated positioning and multi-period momentum signal produce moderately high turnover. As asset class leadership shifts, the composition of the top three changes more frequently than in broader variants. Each position change involves a significant portfolio reallocation — replacing one-third of the portfolio with a potentially very different asset class.
When the trend filter removes one or more assets from eligibility and fewer than three qualify, unfilled slots move to cash. This mechanism provides automatic defensive positioning during periods of widespread market weakness — but because it requires the majority of the universe to break below their moving averages before meaningfully reducing equity exposure, the strategy can remain heavily invested through the early stages of a bear market.
Explore Global Tactical — Aggressive Top 3 (GTAA-AGG3)
See the full backtest across 18 years of market data, or run your own what-if scenarios by adjusting all research parameters.