I am having a hard time seeing a difference between these approaches when using multiple managers. Can someone please enlighten me?
Alpha-Beta separation and core satellite are both ways of creating alpha for your portfolio. 1. Alpha-Beta separation. The alpha is generated from a long short portfolio (Beta Neutral), or a portfolio in which the manager has expertise. The Beta is created by investing in portfolio where you want the Beta exposure. 2. Core+ Satellite. The core is your portfolio which meets like the minimum return on investment (or matches your liabilities). Satellite portfolios are the ones that you add to generate alpha. My two cents.
BTON04 Wrote: ------------------------------------------------------- > 1. Alpha-Beta separation. The alpha is generated from a long short portfolio (Beta > Neutral), or a portfolio in which the manager has expertise. The Beta is created by > investing in portfolio where you want the Beta exposure. What’s difference with long-short ?
AMC Wrote: ------------------------------------------------------- > BTON04 Wrote: > -------------------------------------------------- > ----- > > 1. Alpha-Beta separation. The alpha is > generated from a long short portfolio (Beta > > Neutral), or a portfolio in which the manager > has expertise. The Beta is created by > > investing in portfolio where you want the > Beta exposure. > > What’s difference with long-short ? long-short is part of this strategy… But I am with rstewart… I don’t see any difference between these strategies (alpha-beta v. core satellite)
Long short portfolio - beta neutral (e.g. analyst is long on Ford Stock and Short on GM stock, the same trade can be structured to be Beta neutral).
Core+ Satellite do not use long-short, right ?
Alpha beta separation is a “manager” concept. One way to do this is with a long-short fund, where you try to create alpha with no beta exposure. Core satelite is a “sponsor” concept. For instance a pension fund manager that needs 40% allocation to domestic bonds chooses an index fund as the core, and active managers as the satelites.
I agree that Core-Satellite involves no short-selling… unlike alpha-beta separation. Also with alpha-beta separation, you can mix & match β & α in way that’s unavail. to long-only active mgrs… a key distinction from core-satellite I think it’s easy to confuse the 2, because the concept of core-satellite sounds like separating “alpha” and “beta”… but really, the 2 strategies are very different
Neveruse_95%_everagain Wrote: ------------------------------------------------------- > Also with alpha-beta separation, you can mix & > match β & α in way that’s unavail. to > long-only active mgrs… a key distinction from > core-satellite ?
So if do this… invest 70% into the market index to get beta exposure only… 10% - i will let Active manager 1 to manage this portion of my money 20% - i will let Active manager 2 to manage this portion Question1: can Active manager 1 have a long-short strategy? Question2: Did I describe core-satellite approach?
Don’t you think Core+ Satellite is more similar to Completeness Fund ?
- Sure, you could. But say this agregate 100% is your domestic equity portfolio. Out of your domestic equity you gave 70% to index, 10% to MGR1 and 20% to MGR2. If MGR1 is running a long short domestic equity fund, the tracking error is going to be high. It might be ok with you, if he is creating enough alpha but it is a consideration. 2. Yes, but manager 1 and 2 do not need to be running beta neutral portfolios, just active.
p.s. I meant to type before: “you can mix & match beta & alpha in way that’s unavail. to long-only active mgrs… a key distinction from core-satellite” I copied from my MS Word notes & the symbols didn’t carry over… wasn’t going nuts
So alpha-beta separation is a specific case of core-satellite approach. Would it be correct to state this way? or these are totally and completely different concepts? or should I just forget about these unimportant differences and take my online sample test?
Core + Satellite is more similar to Completeness Fund ?
kurmanal Wrote: ------------------------------------------------------- > So alpha-beta separation is a specific case of > core-satellite approach. Would it be correct to > state this way? or these are totally and > completely different concepts? or should I just > forget about these unimportant differences and > take my online sample test? Nope. Alpha beta separation is an asset management technique. Core satelite is an asset allocation technique at the “sponsor” level. So core-satelite has to do with how the sponsor allocates assets, tracking error, etc. ABC hedge fund is a long short manager that buys undervalued equities and shorts over valued equities and maintains a beta of zero. - - - This is alpha beta separation Ford Motor Company Pension Investment Committee allocates 50% of the small cap value portion of their portfolio to Vanguard Small Cap Index and the other 50% is allocated equally to 5 active small cap managers - - - This is core-satelite
Alpha-beta seperation : 2 Alpha + 1 Beta ?