Abstract
A core-satellite management consist in having a core portfolio made up of passive management vehicles (index funds, ETFs, etc.) with low management fees, and separately one, or several, very active satellites that are made up of funds with a strong tracking error, or even funds with no constraint whatsoever on managing relative risk with regard to a benchmark (hedge funds, for example). The purpose of the core component is to control management risks and to improve the efficiency of the overall portfolio by limiting costs. The role of the active components is to provide diversification and to generate out-performance. The core-satellite portfolio model was adopted by institutional investor's years ago. However, the wish to improve the investment efficiency after the adverse market conditions of the early 2000, have helped the move to this strategy during the past years.
