What is a completeness fund and how is it different from core-satellite???
A completeness fund is used when you have concentrated holdings, and over time you buy other securities as a form of diversification. A core is everything that is passively indexed or has only low tracking error, or small factor mismatches
Completeness Fund is added to Existing Portfolio for Adjust Total Portfolio Risk Level to desired level. Core-Satellite Strategy divided into Core Fund and Satellite Fund. Core Fund Controls overall Risk and usually constructed by Index Fund or Semi-active Fund. Satellite Funds pursue alpha so those usually constructed by Active Fund… I think…
you also need to have cash available to complete the completeness fund.
I just thought a completeness fund was adding a fund to your other holdings that matches the overall risk of the portfolio to that of the normal benchmark. They’re supposed to eliminate misfit risk I believe.
I think you guys are talking about 2 different definitions of completeness fund. This term shows up in 2 separate sections in the curriculum…1) within how to diversify a concentrated holding in a private wealth investor portfolio (completion portfolio) and 2) core sattellite vs. completion fund approach … Or did I get the terminology mixed up as well? haha
Nope, you’re bang on. Completeness fund (what the question is about) and completeness portfolio are two totally separate things.
completness fund for core satellite portfolio completion portfolio for dealing with low basis stock the way i rememeber it is that “completeness” is a longer word than “completion”…and it comes later in the curriculum later study session/longer word
that’s hilarious…but i can see it being effective…hopefully they won’t ask neither on the exam!
Core fund is a fund to build your portfolio around. For instance, I’ll own a large cap growth mutual fund to start out with. That’s my core. Then I’ll add other investments around that investment to tack on some alpha but your core is your main holding. So in addition, I’ll buy a small cap fund, and an international fund as add-on investments, for example.
A completeness strategy is useful if you have time and money to fund the other assets but yea, it’s a pretty stupid and obvious strategy.
How completeness fund approach eliminates misfit risk? thx
jinstudy Wrote: ------------------------------------------------------- > How completeness fund approach eliminates misfit > risk? > > > thx Because it’s designed to track a benchmark.
Is Completeness Fund an addition to Core Satellite, or is it a different strategy and they are mutually exclusive concepts?
Different. The way I remember this is that Core+Satellites is where you start with something PASSIVE and start adding active returns. Note, although it is the CORE, the passive fund doesn’t necessarily need to be that big. There was a CFAI question where it was only about 20%. Completion fund is where you have an active portfolio and you add the completeness fund to reduce the risk.
Completion fund is when you have a portfolio of active managers and want to use one more strategy to “round out” the risk of the portfolio and fill in the blanks to get the desired exposure.
KickinTheBricks Wrote: ------------------------------------------------------- > Completion fund is when you have a portfolio of > active managers and want to use one more strategy > to “round out” the risk of the portfolio and fill > in the blanks to get the desired exposure. Interesting you describe it like that as this pretty much how I have it drawn on my flashcards. Core + satellites is a smooth core (safe) and spiky satellites (risk) orbiting it, and the completeness fund is drawn as a spiky (risky) center wrapped up in a smooth shell. The shell “rounds out” the rough edges.
I think of a completeness fund as one way of implementing your satellite portfolio. Your satellite portfolio is a portfolio of active managers with varying active exposures. Because you have several active exposures, you have misfit risk. The completeness fund adds various exposures in order to have your satellite portfolio match the risk exposures of your benchmark.