the percentage of the core must be more than 50%?
Ps: i found the answer from google. Yes the strategy must have at least 50% for core to be considered core satellite strategy.
no, but a certain % must be allocated to an index (typically alpha and tracking error are 0 %).
If you allocate a low % to the core that might well be indicative of a high risk tolerance.
That would make sense as the core is set up to earn passive returns and the satellite is set up as being actively managed. The goal being earn some active return without going full blown active.
yes, you must have at least 50% to the core
https://sharewealthsystems.com/core-satellite-investing-approach/
Hmm, the topic test on Equity investments --> Goldsboro Partners Case Scenario begs to differ…I am referring to question 17)
I think this question is wrong. I have another source that confirms we must have at least 50%: publication(page 18).
The problem is: if we have this kind of question in the exam, how will we answer?
I don’t think there is no minimum for it to be considered a core-satellite approach. In one of the CFAI mocks or practice questions there was an example with just 20% core allocation.
You can have 20% in a fund with zero expected alpha and 80% in a fund with alpha of 5% (for ex.).
The explanation said that compared to an allocation of 50% core and 50% satellite, a core allocation of 20% indicates you have a higher risk tolerance --> higher core allocation = lower risk tolerance
I’m going with CFA answer of a smaller core being indicative of higher risk tolerance.
From what I’ve understood, the core should at least have the highest percentage allocation when compared to the other assets. I’ve seen core satellite with a 30% core as well.
What does the curriculum say?
That’s your answer.
I don’t find any specific threshold level in the text. Please enlighten me if I am wrong
To be more clear, the core would be a clearly larger number. Something like 30%, and all the other assets would have an allocation of less than, say, 5%.
the text does not define any threshold. so I guess even a 0.01% weight in index is still a core.
…and the 0.01% asset would be part of the satellite.