Adding "satellite" positions

Claymore Investments, Inc. 15 May, 2010 | 4:35AM

The "satellite" allocation is usually focused on more niche sectors, themes or opportunities, and make up a smaller component of the portfolio. Satellite allocations can be used to complement the more broad core allocations. It may be focused on specific sectors, growth opportunities, increased safety, specific styles like value or growth, different asset classes and even different investment vehicles. The satellite allocation typically adds diversification or exposure to themes and potential opportunities not captured within the core allocation. Some examples of satellite themes are:

  • Overweighting to a sector you find attractive, for example energy, agriculture or financials;

  • Overweighting to a country you find attractive, for example China, Brazil, or Europe;

  • Adding an attractive active manager to the portfolio who you believe can outperform in an asset class, sector or market;

  • Adding individual stocks or bonds that you find attractive or believe can outperform the market.

Whether creating your core equity, core fixed income or satellite component, it is important to create the portfolio by choosing and knowing the specific weighting -- or the percentage of each component -- that will best meet your objectives and risk tolerances most comfortably over the long run. The weight given to each category or theme will be critical in determining both your success and comfort level.

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Claymore Investments, Inc.

Claymore Investments, Inc.