Core/excess capital

I noticed this stuff shows up frequently in the nicks I’ve done in the morning session. Seems to count for a lot of points also. Really hope it shows up on the actual exam. Are there any ways they could be tricky? Seems like they always set it up in tables so it’s really intuitive to solve.

pure indexing portfolio allocation: 30%

enhanced indexing portfolio allocation: 20%

semi active portfolioo allocation:10%

active management allocation A: 20%

active management allocation B: 20%

What is the % of core?

what is the % of satelite?

sorry, I completely misread your post . lol

Passme - that’s core/sattelite portfolios, Ithink the question is refering to core/excess capital from private wealth management.

I would say the only big trick is to know to discount using the real risk free rate. otherwise as long as you know the equtions you should be good.

now for your post…

tricky points:

  1. if forecast with real spending need, must discount at real rate.

if forecast with nnominal, must discount at nominal.

  1. in one occassion I was so caught up with the calculations, and forgot to multiply the combined probability with real spending.


^ that should be right.

I thought the core was only the passive part?

^ I am glad I just save you a point or 2!

core=index and enhanced index and semi active.

satelite: full blown active only.

for nominal you should multiply (1+r)*(1+inflation) correct?



thanks passme