Is there a guideline or heuristic on proportions in a core-satellite allocation.
In practice, prior to this reading, I have always figured about 80 core/ 20 satellite.
In the “Goldsboro” topic test, there’s an example where “Twenty percent of the investment was placed in this fund, creating a core, with the remainder invested in non-index funds, creating a satellite.”
Where do we draw the line, folks?
Correct me if I’m wrong…
I don’t think there’s a set limit. If you have a portfolio which tracks index it is a core-satellite.
are you jabronis ready?
I think it also has to do with the way it is constructed or framed. If the portfolio starts with actively managed funds and they add an index fund to “round it out,” that would be completeness, but if you’re starting with an index fund, it’s core-satellite. From Schweser:
Professor’s Note: Both core-satellite and completeness have a similar objective, a total portfolio that meets the client’s overall risk and return exposure characteristics. The distinction is the core-satellite starts with a desired index- like portfolio and then adds actively managed funds, seeking + value added. The completeness portfolio starts with an existing position that does not have the desired overall characteristics and adds positions that are specifically intended to make the total portfolio better reflect the desired risk and return exposure characteristics.
+1