RT Journal Article SR Electronic T1 Revisiting Core-Satellite Investing JF The Journal of Portfolio Management FD Institutional Investor Journals SP 64 OP 75 DO 10.3905/jpm.2004.443322 VO 31 IS 1 A1 Noël Amenc A1 Philippe Malaise A1 Lionel Martellini YR 2004 UL https://pm-research.com/content/31/1/64.abstract AB Tracking error is not necessarily bad. Good tracking error would be outperformance of a portfolio with respect to the benchmark. If they severely restrict the amounts invested in active strategies as a result of tight tracking error constraints, investors foreclose the opportunity for significant outperformance, especially during market downturns. A new methodology based on an optimal dynamic adjustment of the fractions invested in a passive core versus an active satellite portfolio allows investors to gain full access to good tracking error, while keeping bad tracking error below a given threshold. The method is a natural extension of constant-proportion portfolio insurance techniques.