Satellite (financial)

Modern Portfolio Theory, the Nobel Prize winning theory of investing, asserts that the primary determinant in the performance of an investment portfolio is how it is allocated among various asset classes. Asset classes are broadly separated by stocks, bonds, and cash. More specifically, these broad asset classes are further subdivided by the market capitalization ("small cap", "mid cap", or "large cap") of the securities in the underlying mutual funds, whether the stocks are growth stocks or value stocks (see value investing) and whether the stocks in the funds are of United States ("domestic") based corporations or are based in non-U.S. countries ("international"). Bond funds are subdivided into government bonds or corporate bonds which are, in turn further subdivided by the average length of maturity of the bond (short, medium, or long term). In this nomenclature, satellite asset classes represent a minor portion (typically not more than 15% in aggregate) of aninvestment portfolio. These are typically mutual fund investments rather than individual corporate stocks or bonds or government bonds. Some examples are emerging markets stocks or bonds, foreign real estate investment trusts, or commodities funds. The object of holding these funds is to increase diversification in the portfolio. "Satellites continue to expand their role in portfolios as crucial drivers of diversification and sources of higher alpha potential" "Goldman Sachs Asset Management, Market Pulse, June 2008" (The author is unable to provide a reference to this article due to its declared use restricted to investment professionals). "Prospectus, Goldman Sachs Select Satellite Funds", Goldman Sachs Asset Management, April 29, 2008. "Satellite Strategies Portfolio" [http://www2.goldmansachs.com/client_services/asset_management/mutual_funds/u_s_funds/pdf/family_of_funds.pdf] , page 8. Help with other references is appreciated.