Bringing core and satellite approaches to hedge funds

academic paper

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 sacri

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