The success of the core–satellite approach in multimanager investing has been debunked by new research from domestic boutique Ankura Capital.
In an analysis of the Mercer performance surveys of Australian equities funds managers from January 2005 to June 2010, Ankura, a quantitative manager, found that the purported strength of core–satellite manager line-ups were being “challenged by the evidence, particularly since the start of the GFC [global financial crisis]” as their returns lagged all but those posted by passive managers.
Ankura’s latest research note, Debunking manager configuration myths, found that growth and core managers dominated rankings in the 66 surveys throughout this time frame, and that returns from quantitative managers were spread across the universe. Although some value managers achieved top-quartile rankings, most were placed among multi-managers and passive funds.
As passive managers performed “consistently worse” than their active rivals, Ankura found that managers taking on more active risk had generally underperformed more moderate managers since the onset of the GFC.
“The implication of these two findings is that a combination of a passive core with aggressive satellite managers is at long odds to succeed,” Ankura wrote, concluding that not-so-aggressive active managers were better suited to the times.
“Moderate volatility managers have been consistently more successful than high volatility managers over recent years.”
Ankura also found that core managers, as a group, displayed the most consistent track records, while the variance of quantitative managers’ returns indicated they were not as clustered as commonly believed.