Core satellie vs. completeness fund

[streetplay]

Can anyone please clarify what the core-satellite and completeness funds are?
Even after reading this part a couple of time, I still do not clearly understand what they are, how they are different.
Thanks in advance.

 

[tribeca_regent]

core-satellite. start with core (copy index) and go active with satellite (extra alpha with risk).
completeness. start with orig portfolio and complement it with other securities to “complete” your pf thru diversification.

 

[jpbcologne]

Core-satellite is a strategy which helps an investor to secure a return through investing in core of holdings of a passive index and at the same time, adding some additional return through active manager. A common satellite investment is a holding in emerging markets securities, as they are highly volatie, but provide diversification due to the low correlation with traditional investments (which build the core).
In core-satellite the manager will still have some differences in risk exposure relative to the benchmark. In order to avoid this, the manager can use completeness fund approach, which says that:
completeness fund + active portfolio = risk exposure of the benchmark
In this case, active return is maintained and active risk minimized.

 

[Swaption11]

How does the completeness fund compare with core satellite approach? Its my understanding that completeness fund is a way to diversify concentrated positions in stock to get more market exposure when the funds cannot be sold. Core sat is a strategy for fund managers to increase active return while managing risk with no regard to illiquid/concentrated positions. The two strategies are used for two completely different investor profiles.

 

[tribeca_regent]

i’m getting the impression that core-sat starts off with passive index to make alpha. so the main focus would be your passive index base.
on the other hand, you start off with your active portfolio to save your ass with the completeness fund through diversification. so here your main focus would be your concentrated portfolio.
someone correct me please.

 

[Swaption11]

A core sat does not need to have a passive index as its main focus this is misleading. It can be a 20-40-40 split of core sat sat. A completeness fund diverifies a concentrated stock position with the rest of the available assets. It is not a solution to an active portfolio quite the opposite the position cannot be traded. The focus is decreasing unsystematic risk in favor of systematic risk.