Remove the Core

7 Pages Posted: 6 Sep 2017

Date Written: April 2017


Consultants at Cambridge Associates have shown how to build what they believe is a better "core-satellite" portfolio. Get rid of the passive core component (such as an S&P 500 Index fund) completely and load up on the satellites.

The team compared hypothetical core-satellite portfolios with hypothetical "donut" portfolios, which lacked the core component.

"...over sufficient time periods, not only were the median and higher-end outcomes better for the donut portfolio, but the lowest percentile performance was similar to the core-satellite portfolios," said Cambridge Managing Director Hamilton Lee. "And these results are net of fees."

If you are employing this structure, it's important not to look at individual manager performance, but at the composite level -- and to look at it over a longer time frame, not shorter time frames.

"It's interesting that among proponents of passive management I have gotten less pushback than I expected," said Cambridge Managing Director Jackie Williams. "The results are compelling."

Keywords: core, satellite, portfolio, passive, investing

Suggested Citation

Institute, Brandes, Remove the Core (April 2017). Brandes Institute Research Paper No. 2017-03. Available at SSRN: or

Brandes Institute (Contact Author)

Brandes Investment Partners ( email )

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