What is Core-Satellite Investing, and Why Would Investors Use It?

Aspen explains:

Core-satellite investing is a flexible approach to portfolio construction that blends the stability of broad market exposure with the precision of targeted strategies. It allows investors to build portfolios that are not only cost-effective and diversified but also tailored to their personal goals, time horizons, and preferences.

The approach divides a portfolio into two components: the core and the satellite. The core forms the foundation, typically 80–90% of the total portfolio and is designed to deliver long-term capital growth. This portion is usually made up of low-cost investments with broad exposure across major asset classes such as global equities and bonds. Its primary objective is to grow ahead of inflation over time, providing a stable and reliable anchor for the investor’s overall financial plan. The satellite portion, which makes up the remaining 10–20%, is where personalisation comes into play. These investments are more specialised and can be used to complement the core by adding exposure to areas not well represented in broad indices, such as smaller companies or thematic opportunities. Satellites can also be tailored to meet specific goals, such as generating income, preserving capital, or planning for a future expense like a house deposit or school fees. They may vary in risk level, investment style, or time horizon, offering a high degree of flexibility.

This structure is particularly useful for investors with more complex needs. While younger investors or those with smaller portfolios might opt for a simple, cost-efficient core-only solution, others, such as high-net-worth individuals, may benefit from a more nuanced setup. Core-satellite investing is especially well-suited to clients with multiple financial objectives, such as those using “bucketing” approaches, or those with tax considerations that require careful structuring of assets.

Aspen offers seven distinct satellite portfolios, each designed to meet specific objectives across the risk spectrum. These include:

• Cash Plus – a highly liquid, low-risk option for short-term cash holdings
• Gilts – offering tax-efficient exposure to short-dated government bonds
• Capital Preservation – a low-risk alternative to cash or short-term bonds
• Four Seasons – a balanced, all-weather portfolio designed to deliver smoother returns over time
• High Income – targeting a 5% yield for income-focused investors
• Smaller Companies – an equity fund focused on the next generation of industry leaders; and
• Global Megatrends – providing thematic exposure to transformative global trends such as climate change and technological innovation

These satellite portfolios can be used individually or in combination, depending on the investor’s goals. For example, an investor in the drawdown of retirement could use a blend of Aspen’s Cash Plus and Four Seasons satellites, and Growth Passive core portfolio to manage liquidity, lifestyle, and long-term legacy investing goals respectively – each aligned to different time horizons.

Ultimately, core-satellite investing is not a rigid formula but a framework for personalisation. It allows advisers and investors to construct portfolios that are not only robust and cost-effective but also aligned with an individual’s circumstances. Whether the goal is to preserve capital, generate income, diversify exposure, or plan across multiple timeframes, this approach offers flexibility to build clean and simple investment solutions that reflect what matters most to each investor.

For more information contact Aspen.