Tactical Asset Allocation (TAA)
Adjusting a portfolio's mix of broad asset classes over time in response to the market environment, instead of holding fixed weights regardless of conditions.
Also called: TAA, tactical allocation
Tactical asset allocation (TAA) shifts how much a portfolio holds in each asset class as the environment changes, rather than keeping the same proportions through everything. It operates on whole categories (equities, bonds, commodities, cash) and not on the choice between individual companies.
The term covers two practices. In the discretionary form, a person judges when to shift. In the systematic form, the condition and the response are written down in advance and the rules decide. Both are tactical asset allocation, and a fund described as tactical may be either.
Witan Way's strategies are of the second kind: rules-based, documented, and therefore examinable by someone who did not write them.
Related terms
- Market regimeA persistent market environment (trending, calm, or turbulent) that a rules-based reading identifies from price behaviour, rather than a prediction of what comes next.
- DiversificationSpreading capital across assets that behave differently, so weakness in one is offset by others. It reduces avoidable risk but does not remove market-wide risk.