Portfolio applications
Practical applications for a regime-aware liquid sleeve.
RAD-AA is best understood as a rules-based liquid allocation sleeve: a research framework designed to carry diversified risk in normal regimes, reduce exposure during stress, and sit beside assets that are harder to sell or rebalance.
Evaluate RAD-AA as a tactical sleeve inside a balanced portfolio.
A practical implementation is to hold RAD-AA beside equities and bonds with 10 percentage-point rebalancing ranges. The page tests both a full 40% RAD-AA sleeve and a blended 50% SPY / 30% bonds / 20% RAD-AA sleeve.
Cumulative result
Each path uses 10 percentage-point rebalance ranges. The traditional path is 60/40, the full tactical replacement keeps 60% in SPY and replaces the 40% bond sleeve with RAD-AA, and the blended tactical path holds 50% SPY / 30% bonds / 20% RAD-AA.
Underwater view
The same comparison shown as drawdown. This is where a liquid tactical sleeve has to earn its keep.
| Portfolio | CAGR | Vol | Sharpe | Max DD |
|---|---|---|---|---|
| 60% SPY / 40% RAD-AA | +9.36% | 13.26% | 0.74 | -40.91% |
| 50% SPY / 30% bonds / 20% RAD-AA | +8.22% | 10.34% | 0.82 | -31.38% |
| Traditional 60/40 bonds | +8.51% | 10.78% | 0.81 | -31.33% |
| SPY only | +9.32% | 17.83% | 0.59 | -58.01% |
In this test, the RAD-AA sleeve improved long-run CAGR versus the traditional 60/40 structure, but a full bond-sleeve replacement still takes more equity-linked path risk than a conventional balanced portfolio. The more defensible use is as a tactical diversifier whose size is set by the investor's need for liquidity, drawdown control, and participation.
A liquid counterweight to property-heavy wealth.
Many investors already have a large, leveraged, illiquid exposure to property. The relevant question is not whether RAD-AA directly hedges a home; it is whether the liquid sleeve has historically drawn down less than the public assets most exposed to the same risk cycle.
A home is not VNQ, and a local property market is not the public REIT market. But VNQ is a useful liquid proxy for real-estate beta, and it makes the balance-sheet point more concrete. If a household already has most of its net worth in property, the liquid portfolio should be judged partly by how much liquidity it preserves during equity, bond, and real-estate drawdowns.
The chart shows each sleeve's underwater path across the evaluation window: RAD-AA, SPY, 60/40 bonds with the same 10 percentage-point rebalance range, and VNQ. The table below then isolates the five worst VNQ drawdown episodes and reports how the other sleeves behaved over the same peak-to-trough intervals.
Drawdown path · OOS
Five worst VNQ drawdown periods
| Period | VNQ | RAD-AA | SPY | 60/40 |
|---|---|---|---|---|
| 7 Feb 2007 → 6 Mar 2009 | -73.6% | -0.2% | -54.6% | -26.6% |
| 21 Feb 2020 → 23 Mar 2020 | -42.2% | -5.0% | -33.4% | -15.7% |
| 31 Dec 2021 → 25 Oct 2023 | -34.4% | -8.3% | -10.6% | -22.7% |
| 3 May 2002 → 23 Jul 2002 | -18.7% | -11.5% | -26.2% | -13.0% |
| 21 May 2013 → 19 Aug 2013 | -17.5% | -5.4% | -0.8% | -4.6% |
Table values are same-period peak-to-trough returns during each VNQ episode; they are not each sleeve's own maximum drawdown.
Best used as a diversifier, not as a magic substitute.
The strategy is most defensible as a liquid diversifying sleeve inside a broader plan: a bond-sleeve alternative, a risk-control sleeve for equity-heavy portfolios, or a household-liquidity sleeve for investors whose largest asset is a home. It should not be the only defensive asset. Cash reserves, insurance, taxes, liquidity needs, and implementation costs still matter.
Standalone reference
- RAD-AA CAGR
- +8.43%
- RAD-AA Sharpe
- 0.83
- RAD-AA max DD
- -23.47%
- OOS window
- 2002-2026