Bringing core and satellite approaches to hedge funds
By Noël Amenc and Lionel Martellini, EDHEC Risk and Asset Management Research Centre
Given that most active managers still have dominant passive exposure to their benchmark, the core/satellite approach suggests investing passively in a low-fee index fund (or enhanced index product) as a core portfolio and a variety of active satellite managers with higher tracking error, instead of paying high fees on the passively managed part of their portfolio.
Core/satellite portfolio construction is seen as effective for institutions that want to diversify their portfolios, without
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