ll11

How completeness fund approach eliminates misfit risk?


thx

lcai

jinstudy Wrote:
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> How completeness fund approach eliminates misfit
> risk?
>
>
> thx


Because it's designed to track a benchmark.

NO EXCUSES

thommo77

Is Completeness Fund an addition to Core Satellite, or is it a different strategy and they are mutually exclusive concepts?

bodhisattva

Different.

The way I remember this is that Core+Satellites is where you start with something PASSIVE and start adding active returns. Note, although it is the CORE, the passive fund doesn't necessarily need to be that big. There was a CFAI question where it was only about 20%.

Completion fund is where you have an active portfolio and you add the completeness fund to reduce the risk.

Zestt

Completion fund is when you have a portfolio of active managers and want to use one more strategy to "round out" the risk of the portfolio and fill in the blanks to get the desired exposure.

zwjy

KickinTheBricks Wrote:
-------------------------------------------------------
> Completion fund is when you have a portfolio of
> active managers and want to use one more strategy
> to "round out" the risk of the portfolio and fill
> in the blanks to get the desired exposure.


Interesting you describe it like that as this pretty much how I have it drawn on my flashcards. Core + satellites is a smooth core (safe) and spiky satellites (risk) orbiting it, and the completeness fund is drawn as a spiky (risky) center wrapped up in a smooth shell. The shell "rounds out" the rough edges.



Edited 1 time(s). Last edit at Thursday, June 2, 2011 at 08:21AM by mutton.

Windjam

I think of a completeness fund as one way of implementing your satellite portfolio. Your satellite portfolio is a portfolio of active managers with varying active exposures. Because you have several active exposures, you have misfit risk. The completeness fund adds various exposures in order to have your satellite portfolio match the risk exposures of your benchmark.



Edited 2 time(s). Last edit at Thursday, June 2, 2011 at 08:34AM by LobsterBoy.