Core-Satellite Investing for Independent Financial Advisors
As the lessons of 2008 linger, many financial advisors are still searching for approaches to construct risk-managed portfolios better suited for today’s volatile markets. Peter Needham, EVP at AEPG Wealth Strategies agrees, “They need to be able to offer their clients investment solutions that provide greater diversification of return streams, coupled with measurable downside protection during periods of market stress.”
AEPG Wealth Strategies designed and implemented the AEPG Core-Satellite Solutions nearly three years ago to provide clients better downside protection of their invested capital and give the firm’s advisors greater flexibility in managing diversification both in ‘normal’ times and times of market stress. AEPG Wealth Strategies chose a core-satellite structure as an alternative to 1) traditional “MPT style” asset class diversification that failed to deliver, and 2) fixed allocations that restricted AEPG’s ability to react effectively to dynamic conditions. There is roughly $420 million currently invested in the strategy.
“We chose to launch the AEPG Core-Satellite Solutions on the Adhesion Wealth Advisor Solutions market-leading implementation platform for a number of reasons,” continued Needham. “They were able to truly listen, and respond to, our specific needs, offering a level of high-touch service, flexibility and customization that we could not find with any other managed account platform.”
AEPG Core-Satellite Solutions provide:
- The objective of superior risk-adjusted total returns over the long term;
- Low-risk component providing true diversification especially in times of market stress, current income with limited volatility and downside risk;
- A passive “Core” based upon a global equity model;
- Active “Satellites” supported by a dedicated research team focused on identifying tactical opportunities, with risk management parameters that identify precise entry and exit points and risk management parameters to protect gains and downside risk.
AEPG Core-Satellite Solutions benefits to wealth managers include:
- An investment solution that addresses client apprehension of today’s markets;
- Ability to leverage the expertise and technology of specialists in investment research and portfolio implementation;
- Active monitoring and rules-based rebalancing of client accounts;
- Distinctive performance reports which reflect the unique structure of core-satellite portfolios;
- Custodian flexibility – available for accounts held at Charles Schwab Advisors Services, TD Ameritrade Institutional, Fidelity Institutional Wealth Services, or Pershing Advisor Solutions.