Alpha-beta seperation vs core satelite please, someone, multiple, between, difference

adehbone

I am having a hard time seeing a difference between these approaches when using multiple managers. Can someone please enlighten me?

NakedPuts2011

Alpha-beta seperation : 2 Alpha + 1 Beta ?

Analyze_This

Core + Satellite is more similar to Completeness Fund ?

oneboy

kurmanal Wrote:
-------------------------------------------------------
> So alpha-beta separation is a specific case of
> core-satellite approach. Would it be correct to
> state this way? or these are totally and
> completely different concepts? or should I just
> forget about these unimportant differences and
> take my online sample test?


Nope. Alpha beta separation is an asset management technique. Core satelite is an asset allocation technique at the "sponsor" level. So core-satelite has to do with how the sponsor allocates assets, tracking error, etc.

ABC hedge fund is a long short manager that buys undervalued equities and shorts over valued equities and maintains a beta of zero. - - - This is alpha beta separation

Ford Motor Company Pension Investment Committee allocates 50% of the small cap value portion of their portfolio to Vanguard Small Cap Index and the other 50% is allocated equally to 5 active small cap managers - - - This is core-satelite

bpdulog

1. Sure, you could. But say this agregate 100% is your domestic equity portfolio. Out of your domestic equity you gave 70% to index, 10% to MGR1 and 20% to MGR2. If MGR1 is running a long short domestic equity fund, the tracking error is going to be high. It might be ok with you, if he is creating enough alpha but it is a consideration.

2. Yes, but manager 1 and 2 do not need to be running beta neutral portfolios, just active.

bodhisattva

Don't you think Core+ Satellite is more similar to Completeness Fund ?

dyga

I agree that Core-Satellite involves no short-selling... unlike alpha-beta separation.

Also with alpha-beta separation, you can mix & match β & α in way that's unavail. to long-only active mgrs.... a key distinction from core-satellite

I think it's easy to confuse the 2, because the concept of core-satellite sounds like separating "alpha" and "beta"... but really, the 2 strategies are very different

nannan66

So if do this..

invest 70% into the market index to get beta exposure only..
10% - i will let Active manager 1 to manage this portion of my money
20% - i will let Active manager 2 to manage this portion

Question1: can Active manager 1 have a long-short strategy?

Question2: Did I describe core-satellite approach?

thommo77

Alpha beta separation is a "manager" concept. One way to do this is with a long-short fund, where you try to create alpha with no beta exposure.

Core satelite is a "sponsor" concept. For instance a pension fund manager that needs 40% allocation to domestic bonds chooses an index fund as the core, and active managers as the satelites.

ohai

AMC Wrote:
-------------------------------------------------------
> BTON04 Wrote:
> --------------------------------------------------
> -----
> > 1. Alpha-Beta separation. The alpha is
> generated from a long short portfolio (Beta
> > Neutral), or a portfolio in which the manager
> has expertise. The Beta is created by
> > investing in portfolio where you want the
> Beta exposure.
>
> What's difference with long-short ?


long-short is part of this strategy...

But I am with rstewart.. I don't see any difference between these strategies (alpha-beta v. core satellite)