Alpha-Beta separation and core satellite are both ways of creating alpha for your portfolio.
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.
2. Core+ Satellite. The core is your portfolio which meets like the minimum return on investment (or matches your liabilities). Satellite portfolios are the ones that you add to generate alpha.
BTON04 Wrote:
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> 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.
AMC Wrote:
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> 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)
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.
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
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?