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Are Your Core and Satellites Working in Harmony?

Simon Turner - Head of Content (CFA)
Simon TurnerHead of Content (CFA)
Mon 30 Jun 2025
6 min read

Here’s a question you won’t be asked everyday: are your core and satellites working in harmony?

This question doesn’t relate to your gym workout plan. The core-satellite approach is a portfolio construction strategy which is gaining renewed attention amongst some investors. And for good reason. Blending stability with flexibility, this strategy offers a structured yet dynamic way to optimise returns while effectively managing risk…

What is Core-Satellite Investing?

Core-satellite investing is a portfolio construction strategy that divides a portfolio into two separate components:

  1. Core: A diversified, low-cost foundational portfolio designed to deliver long-term, market-like returns. Think of the core as the investment engine: the steady, reliable portion which is built to go the distance.
  2. The Satellites: A set of more specialised, actively managed or tactical investments intended to enhance performance or manage specific risks. The satellites are performance boosters. They tend to be targeted and more opportunistic, enabling you to take advantage of market trends, thematic plays, or inefficiencies.

Source: HSBC


How it Helps Investors

The core-satellite approach is well-suited to address many of the challenges faced by investors.

For example, the benefits include:

  • Cost Efficiency: By anchoring your portfolio with low-cost ETFs, investors are able to keep fees down which allows their returns to better compound.
  • Diversification: The core provides broad market exposure, while the satellites enable targeted bets on sectors, regions, or styles not captured in the core. All up, a core- satellite portfolio benefits from enhanced diversification.
  • Risk Management: The satellites can be used to hedge specific risks such as inflation and currency, while they can also be help address home market bias.
  • Return Enhancement: Actively managed satellites can add alpha to a core which is performing in line with the market.

Constructing the Core

The core should represent the majority of your portfolio, usually 60–80%, depending on your risk profile and investment horizon. For most investors, it is built using passive or rules-based strategies. These might include:

The key attributes of a successful core are broad diversification, low cost, and transparency.

Designing the Satellites

Satellites allow investors to express their specific views, seize emerging opportunities, or manage nuanced risks. The satellite portion might consist of 20–40% of the portfolio and include:

  • Managed Funds: Such as Trillium ESG Global Equity Fund with a proven ability to outperform in niche areas such as small caps, emerging markets, or ESG strategies.
  • Thematic ETFs: Such as Investible Climate Tech Fund with a focus on structural investment themes like AI, clean energy, or biotech so as to gain tactical exposure to sectors with strong tailwinds.
  • Alternatives: Add private equity such as iPartners Emerging Equity Fund, hedge funds, or commodities to enhance diversification and reduce correlation with traditional assets.
  • Tactical Tilts: Add short-to-medium-term positions based on your macroeconomic views. e.g. An overweight defensives position such as Healthbridge Capital in a late-cycle environment may be prudent, as may rotating into inflation hedges when inflation is trending upwards.

Practical Considerations

Here are a few practical considerations to bear in mind with core-satellite portfolio construction:

  1. Rebalancing
    Establish clear rules for rebalancing the portfolio back to your target allocations. This might be done quarterly, semi-annually, or based on tolerance bands. Rebalancing enforces discipline, and keeps risk in check.
  3. Costs and Taxation
    Use tax-aware structures where possible, such as ETFs with low turnover or managed accounts that allow capital gains deferral.
    Be mindful of franking credits, which can make Australian equities more attractive in taxable accounts, and consider holding international assets in tax-efficient vehicles within superannuation.
  5. Behavioural Discipline
    The core-satellite structure helps counteract many common behavioural pitfalls. For example, by anchoring their portfolio with a core that performs steadily over time, investors may feel less pressure to overtrade or chase short-term performance.
  7. ESG and Impact Considerations
    Many investors integrate environmental, social, and governance (ESG) criteria into their portfolios to great effect.
    The core-satellite framework enables this elegantly: by maintaining broad exposure through sustainable ETFs such as JP Morgan Climate Change Solutions Active ETF (Managed Fund) (ASX: T3MP), and targeting impact investments such as NorthStar Impact Australian Equities Fund within their satellite allocations.

A Real-World Example

Consider an Australian investor, Sarah, aged 45 with a balanced risk profile and a $1 million portfolio.

Her core might consist of:

Her remaining 20% could be invested in satellites such as:

This diversified mix allows Sarah to participate in broad market growth, benefit from the cost efficiency of ETFs, and still express her investment views without constantly reshuffling her portfolio.

More Than Financial Theory

Core-satellite investing is not just a theoretical approach to portfolio construction. It’s a practical and proven way to navigate complexity while enabling investors to achieve their long-term goals. It offers a compelling blend of structure and flexibility, enabling investors to maintain a disciplined long-term strategy while remaining agile.

Like the best gym workout plans, the devil is in the details. Asset selection, cost control, tax awareness, and behavioural discipline will ultimately shape your outcomes. But executed thoughtfully, core-satellite portfolio construction can be a powerful engine for generating optimised, risk-adjusted returns.


Core Fund Examples Mentioned

Global X S&P/ASX 200 High Dividend ETF (ASX: ZYAU)

Global X S&P/ASX 200 High Dividend ETF (ASX: ZYAU)

Invest in a selection of quality dividend-paying companies.

Retail Investor
Objective
Growth and Income
Category
ETFs
Min. Investment
$500
Liquidity
Listed
Availability
Open for investment
Funding Stage
Listed
Structure
ETF
View
iPartners Credit Investment Fund

iPartners Credit Investment Fund

The iPartners Credit Investment Fund aims to provide investors with a diversified portfolio of high yielding private credit assets including asset backed securities, corporate credit and property debt.

Wholesale Investor
Objective
Income
Category
Income Funds
Min. Investment
$10,000
Liquidity
Unlisted liquid
Availability
Open for investment
Funding Stage
Unlisted Early-Stage Fund
Structure
Managed Fund
View
Betashares Diversified All Growth ETF (ASX: DHHF)

Betashares Diversified All Growth ETF (ASX: DHHF)

Exposure to a low-cost 'all-growth' assets diversified portfolio

Retail Investor
Objective
Growth and Income
Category
ETFs
Min. Investment
$1
Liquidity
Listed
Availability
Open for investment
Funding Stage
Listed
Structure
ETF
View

Satellite Fund Examples Mentioned

Investible Climate Tech Fund

Investible Climate Tech Fund

The Fund will invest in early-stage high potential growth companies, with a focus on seed stage and follow-on investments. (For Wholesale Investors Only)

Wholesale Investor
Objective
Growth
Category
Equity Funds
Min. Investment
$100,000
Liquidity
Illiquid
Availability
Open for investment
Funding Stage
Unlisted Early-Stage Fund
Structure
Other
View
iPartners Emerging Equity Fund

iPartners Emerging Equity Fund

The Fund aims to provide investors with a diversified portfolio of high performing growth equity assets across a broad spectrum of industries.

Wholesale Investor
Objective
Growth
Category
Alternatives Funds
Min. Investment
$10,000
Liquidity
Illiquid
Availability
Open for investment
Funding Stage
Unlisted Early-Stage Fund
Structure
Managed Fund
View
NorthStar Impact Australian Equities Fund

NorthStar Impact Australian Equities Fund

The fund is a diversified portfolio of Australian equities across a range of impact focus areas that seeks to demonstrate a financial return along with measurable positive impacts on society and the environment.

Retail Investor
Objective
Growth and Income
Category
Equity Funds
Min. Investment
$10,000
Liquidity
Unlisted liquid
Availability
Open for investment
Funding Stage
Unlisted Mature Fund
Structure
Managed Fund
View
Seneca Australian Small Companies Fund

Seneca Australian Small Companies Fund

A portfolio of 20-50 sufficiently liquid, small and mid-cap ASX-listed companies, with a preference for high quality, profitable and growth focused businesses.

Wholesale Investor
Objective
Growth
Category
Equity Funds
Min. Investment
$100,000
Liquidity
Unlisted liquid
Availability
Open for investment
Funding Stage
Unlisted Early-Stage Fund
Structure
Managed Fund
View
HMC Capital Partners Fund 1

HMC Capital Partners Fund 1

Investing in high conviction strategic stakes where there is potential to unlock ‘trapped’ value through an active, private equity style investment approach

Wholesale Investor
Objective
Growth
Category
Equity Funds
Min. Investment
$50,000
Liquidity
Unlisted liquid
Availability
Open for investment
Funding Stage
Unlisted Mature Fund
Structure
Managed Fund
View
Global X Physical Gold Structured (ASX: GOLD)

Global X Physical Gold Structured (ASX: GOLD)

Discover Australia’s pioneering gold investment opportunity.

Retail Investor
Objective
Growth
Category
ETFs
Min. Investment
$500
Liquidity
Listed
Availability
Open for investment
Funding Stage
Listed
Structure
ETF
View

Disclaimer: This article is prepared by Simon Turner. It is for educational purposes only. While all reasonable care has been taken by the author in the preparation of this information, the author and InvestmentMarkets (Aust) Pty. Ltd. as publisher take no responsibility for any actions taken based on information contained herein or for any errors or omissions within it. Interested parties should seek independent professional advice prior to acting on any information presented. Please note past performance is not a reliable indicator of future performance.

Author

Simon Turner - Head of Content (CFA)
Simon Turner
Head of Content (CFA)

Simon Turner is an ex-fund manager with 20 years investing experience gained at Bluecrest, Kempen and Singer & Friedlander who now writes educational content about investing and sustainability. He's also the published author of The Connection Game and Secrets of a River Swimmer.

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