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Ted Aronson and his AJO Partners manage about $25 billion of institutional assets. Aronson puts his family's taxable money in this well-diversified portfolio of no-load index funds.

Fund Weight Ticker ETF
US Equities 40% VFINX, VEXMX, VISGX, VTSMX, VISXX VTI, TMW, VBK, VBR
International Equity 20% VPACX, VEURX VEA
Emerging Markets 10% VEIEX EEM
US Bonds 30% VIPSX, VUSTX, VWEHX TIP, LQD, HYG

This is a well diversified four asset class portfolio with an aggressive profile. The US equities are broadly diversified. Asia Pacific is put above Europe for developed markets. There is a diversified set of fixed income with VWEHX and VUSTX being relatively high risk. The long term treasury bond has proved to be a good diversifier in recent history.
The US component is possibly over-weighted and emerging markets could be increased or, even better, some real estate assets could be added.

This lazy portfolio will be compared with the same funds with a balanced (i.e. all equity asset classes equally weighted) buy and hold with monthly rebalancing and the ability to rotate styles within the asset classes. This will look at what difference alternative fund balances contribute to the results. We will look at a Six asset class portfolio with Strategic Asset Allocation that will shed light on the benefits of extra asset classes.

Then we will compare the impact of tactical asset allocation on the Aronson funds and also a six asset class SIB to examine the returns delivered by a TAA strategy applied to Aronson and broader funds.
Aronson Portfolio Returns Compared

full comparison


Annual returns 1 year 3 years 5 yea
Aronson Original 9 -1 3
Aronson SAA 12 1 6
Aronson TAA 6 4 13
Six SIB TAA 14 7 14


The original lazy portfolio performs in a satisfactory manner. The 1 year returns top the table but that is coming from the worst three and five year results. The balanced buy and hold gives better long term results and six asset class SIB has even better results. This is expected as diversification normally beats more funds in fewer asset classes.
Tactical asset allocation delivers the best results and, again, more diversification beats more funds in fewer asset classes.
The tradeoff is being involved monthly with your portfolio to squeeze out better returns compared to an annual review; once a month seems a reasonable level of effort to put extra money in your pocket. The spread of 5 year returns is around 11% which is significant in terms of having a bigger nest egg.
Takeaways
  • Tactical Asset Allocation reduces downside risk and that wins in the current uncertain environment
  • The Aronson lazy portfolio has satisfactory returns but can be beaten
  • ETFs can readily be used to implement these portfolios with good performance
  • A 11% spread means that it’s worth looking at alternatives





Disclosure: No Positions

Source: Aronson Family Portfolio Reviewed and Compared