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Core-Satellite Fixed Income: Evolving from concept to practice

June 10, 2026

The Core-Satellite approach offers investors a flexible framework for tailoring their fixed income exposure, taking full advantage of the expanding breadth of fixed income building blocks. The “core” and “satellite” components can take multiple forms – index/active, public/private, IG/plus sectors, fundamental/systematic – and can help align outcomes with each client’s unique return, income, volatility, liquidity, diversification, and cost sensitivities. In this paper, we present four representative case studies that illustrate how institutional investors can apply a variety of Core-Satellite designs to align fixed income allocations to their distinct objectives:

1

Diversifying a home-biased portfolio

A global institutional investor seeks to reduce home-country and currency dominance by anchoring a global indexed core with complementary satellites, thereby improving diversification and resilience.

2

Solving for high correlations of traditional active management in corporate bond strategies.

A holdings-based diagnostic reveals considerable overlapping downside correlation across active managers, prompting consideration of a systematic active satellite to diversify drivers.

3

Core-Plus upgrade via private investment grade credit

An institutional allocator adds private investment grade (IG) credit to improve income efficiency and diversify return streams without a large quality downgrade.

Our fourth case study is: Sustainability-led custom Core Satellite for a European asset owner. This looks at the experience of a large pension and life insurance investor that combines indexed core exposures with customized higher-income satellites to align income, implementation at scale, and the incorporation of climate objectives.

Learn more about how investors’ desired outcomes are translated into portfolio construction choices by selecting scalable core exposures and adding select satellites that target specific return, hedge, or diversification goals.

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This paper is part of a broader Income, Engineered for Outcomes series.
➡ Visit the Fixed Income Hub to continue the series

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Diversification does not ensure a profit or guarantee against loss.

Asset Allocation is a method of diversification which positions assets among major investment categories. Asset Allocation may be used in an effort to manage risk and enhance returns. It does not, however, guarantee a profit or protect against loss.

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