TY - JOUR T1 - Constructing Absolute Return Funds with ETFs JF - ETFs and Indexing SP - 37 LP - 46 VL - 2008 IS - 1 AU - Noël. Amenc AU - Felix Goltz AU - Adina Grigoriu Y1 - 2008/09/21 UR - http://guides.pm-research.com/content/2008/1/37.abstract N2 - This article develops an application of ETFs to the management of an absolute return fund. The use of dynamic core-satellite portfolio management makes it possible to construct absolute return funds using ETFs on stock and bond indices. As a result of the ease with which they are traded, ETFs make an ideal vehicle for putting dynamic risk budgeting into practice. The advantage of the dynamic core-satellite portfolio is that, unlike conventional strategic or tactical asset allocation, it relies solely on the observable price path of different ETFs, and a range of predefined parameters. So the problems of estimation and prediction uncertainty of the two conventional allocation methods are avoided. The combination of advanced dynamic risk-budgeting techniques and highly liquid and transparent instruments may provide a more investor-friendly way to deliver a given absolute return with a target level of volatility, independent of prevailing market conditions. ER -