BAA vs HAA: differences between Keller and Keuning's two strategies
HAA is the simplified successor to BAA. Both belong to Wouter Keller's family of strategies and share the idea of watching "canaries", but they differ quite a lot.
Rule comparison
| BAA-G12 | HAA Balanced | |
|---|---|---|
| Paper year | 2022 | 2023 |
| Canaries | SPY, VWO, VEA, BND (4) | TIP (1) |
| Switch signal | Any canary with negative 13612W | TIP with non-positive momentum |
| Offensive assets | 12 (picks 6) | 8 (picks 4) |
| Defensive assets | 7 (picks 3) | 2 (BIL or IEF) |
| Momentum | 13612W (canaries) and price/SMA12 (ranking) | Simple average of 1-3-6-12 |
| Extra protection | Defensives worse than BIL → BIL | Offensives with momentum ≤ 0 → safe asset |
Backtest results
| BAA-G12 | HAA Balanced | |
|---|---|---|
| Since | Sep 2008 | Sep 2008 |
| Annual return | 7.5% | 9.7% |
| Max drawdown | -13.4% | -9.3% |
| Volatility | 8.0% | 9.1% |
| Time in the safe asset | 54% | 29% |
| Annual turnover | 512% | 347% |
What it means in practice
- BAA protects faster (four sensitive canaries) but spends more than half the time out of equities and turns over more. You feel that in the return when the market rises.
- HAA protects less, but takes part in more of the rises and has lower turnover, so lower costs and taxes.
- HAA spends noticeably less time in the safe asset than BAA, so its profile is more aggressive and its turnover lower.
Which one to pick?
There is no objective answer. Ask yourself:
- How much of a drawdown can you tolerate?
- How much turnover (and tax) do you accept?
- How much complexity do you want to follow?
If you want simplicity and lower turnover, HAA or Dual Momentum; if you prioritise fast protection and accept the turnover, BAA. See the sheets: HAA Balanced and BAA-G12.
Frequently asked questions
Does HAA replace BAA?
The authors present HAA as a simpler version with a lower defensive fraction. BAA remains a valid strategy with a different profile.
Can I combine the two?
You can, but understand the overlap: they share assets and philosophy, so the diversification between them is limited.