the average tactical asset-allocation fund has consistently underperformed more static asset-allocation funds. (I used the moderate-allocation Morningstar Category for comparison because its risk profile and target equity allocation range of 50% to 70% of assets are generally in line with those of the typical tactical asset-allocation fund.)...
Performance would look even worse if it included results for funds that were merged or liquidated. Tactical asset-allocation funds have an unusually high mortality rate: Morningstar’s database includes a total of 243 unique funds in this category (not including multiple share classes), but 126 of those no longer exist.
One interpretation is that tactical allocation loses out because of high associated costs (ER, trading slippage). As far as I can tell, the main ways to overcome this drag are to (i) be very cost-conscious during allocation and sizing, and (ii) use leverage to boost returns during favorable market conditions.
From what I understand, there's a real tension between what performs well over the long term in tactical trading and what investors are willing to bear in terms of deviation from the market. So keeping customers tends to pull the fund towards doing strategies that do not perform as well as they might.