Tactical asset allocation is differentiated from "market timing" on the basis of objectives (not technique).
- Generally applied to one asset class
- Used in periods when the manager is negative on the expected return for its primary asset class.
- Perceived by a manager as a method to control or "manage" their own portfolio risk and/or return.
- Tends to base allocation decisions on forecasts.
- Generally uses a short time horizon for decision-making.
- More concerned with relative returns.
Tactical Asset Allocation
- Used by a manager to shift among multiple asset classes (stocks/cash, stocks/bonds/cash, other assets).
- Used by plan sponsors to control or manage the risk and/or return of the total fund.
- Tends to base allocation decisions on reported data.
- Generally uses a longer time horizon for decision-making.
- More concerned with risk control.