What Is Core Plus?
Core plus is an investment managementstyle that permits managers to augment a core base of holdings, within a specified-objective portfolio, with instruments that have greater risk and greater potential return. Funds that utilize this strategy are called core-plus funds.
Core plus funds are typically associated with fixed-income funds, adding alternative investments such as high-yield, global, and emerging market debt to a core portfolio of investment-grade bonds. Core plus equity funds also exist with a similar strategy: They use alternative investments to enhance the return from a core market segment.
key takeaways
- Core plus is an investment managementstyle that permits managers to augment a core base of holdings with instruments that offer greater risk but greater potential return.
- Core plus investment strategies are primarily associated with fixed income funds.
- Equity funds can also use core plus strategies.
Understanding Core Plus
Core plus investment strategies are primarily associated with fixed income funds. They give a fund manager some flexibility to enhance returns from investments beyond the core objective of a fund. The securities used for these extra returns are typically also fixed-income investments, that are often riskier, but potentially more rewarding, than the fund’s core holdings.
Investmentadvisorsin a core plus fund will build its primary assets specifically around securities that meet a specified objective. This portion of the portfolio is designed to be maintained as a long-term investment, with the intention of holding securities virtually forever. Such holdings might represent as much as 75% of the portfolio. The remaining balance would then consist of higher-risk holdings, which may have shorterinvestment horizonsthan the core components of the portfolio. As such, a portfolio's coreinvestmentswould represent a solid foundation to which more aggressive, diversified investments could be added.
Examples of Core Plus Investments
Core plus funds can feature either fixed income or equity investments. All information is accurate as of July 2021.
JPMorgan Core Plus Bond Fund (ONIAX)
The JPMorgan Core Plus Bond Fund (ONIAX) is one example of a core plus fixed income. The Fund invests primarily in investment-grade bonds, but it has the flexibility to tactically invest 35% of the portfolio’s assets in securities outside this central category that have enhanced return potential. The Fund typically invests these enhancement assets in high-yield fixed income and foreign debt. Total assets in the Fund equal $16.7 billion in July 2021. The class A share of the Fund requires a minimum investment of $1,000. The Fund has a gross annual expense ratio of 0.90%.
American Century Core Plus Fund (ACCNX)
The American Century Core Plus Fund is another example of a core plus fixed-income investment. The Fund invests primarily in high-quality, intermediate corporate bonds with five-to-ten-year maturity. But it also invests up to 35% of the overall portfolio in alternative fixed income investments outside of the core holdings—such as lower-grade, "junk bonds"—to maximize the income. The Fund’s investor share has a $2,500 initial investment requirement. The Fund has a total expense ratio of 0.56%. The assets were worth $467.0 million as of July 2021.
JPMorgan U.S. Large Cap Core Plus Fund (JLCAX)
The JPMorgan U.S. Large Cap Core Plus Fund exemplifies an equity core-plus fund. While the Fund centers the majority of its core portfolio around the buying and holding of U.S. large-capitalization companies that it deems undervalued, it also has the ability to sell short such equities to achieve additional returns over its benchmark, the S&P 500 Index. The fund assets equal $4.6 billion. It has a minimum investment of $1,000 and a gross expense ratio of 2.11%.
FAQs
A 15-year-old apartment building that is well-occupied but in need of light upgrades is an example of a core plus investment opportunity. The property will produce ample cash flow but some of the cash will be used for future deferred maintenance such as roofs and parking lot repairs.
What is a core plus strategy? ›
A “Core Plus” strategy seeks real estate with high-quality tenants, in good, not great locations. Core plus properties tend to be of slightly lower quality than Core properties and are purchased more aggressively, with more debt.
What is an example of Core Plus? ›
Examples of Core Plus Investments
- The JPMorgan Core Plus Bond Fund (ONIAX) is one example of a core plus fixed income. ...
- The American Century Core Plus Fund is another example of a core plus fixed-income investment. ...
- The JPMorgan U.S. Large Cap Core Plus Fund exemplifies an equity core-plus fund.
Commercial real estate equity investments can be classified into three strategies: Core — Generally lowest risk and target returns. Core Plus — Generally low-to-moderate risk and target returns. Value-Add — Generally moderate-to-higher risk and target returns.
What is an example of opportunistic real estate? ›
A good example is an office asset becoming obsolete due to the pandemic-accelerated shift toward “work from home.” A mostly vacant office property could be converted to mixed-use or multi-family, and generate an opportunistic return profile through this repositioning.
What is core plus in education? ›
What is Core Plus? A Core Plus program of study uses the power of hands-on learning to better integrate academic and career-based education. Core Plus is an industry-validated, skills-based manufacturing curriculum, with standardized certificate systems to document attainment of learning goals and objectives.
What is a core real estate strategy? ›
“Core” is considered the safest strategy and the one that's closest to fixed income (bonds) in terms of risk and potential returns. It tends to use less leverage than other strategies, very little about the property changes, and cash flows are stable and predictable.
What are examples of core assets? ›
Examples of core assets may include tangible assets such as machinery, production facilities, and intangible assets such as intellectual property. Companies that are forced to sell their core assets are generally liquidating or about to go bankrupt.
What does core mean in investing? ›
A core holding is just what it sounds like: It's the central part of your portfolio. The core requires investments that will be reliable year in and year out. They're the solid foundation for the rest of a portfolio. To reach your investment goals, your portfolio needs a solid, reliable core. The rest is often frills.
What is core investment strategy? ›
A real estate investment strategy categorized by low risk and commensurately low, stable returns. Core investment strategies typically involve longer hold periods, lower levels of leverage, and higher quality assets.
While core plus has an element of property improvement, Value-add requires more capital investment to make property improvements.
What is a core property type? ›
Core Property
Core properties generally feature characteristics such as stabilized occupancy, investment grade tenants, long lease terms, high quality construction with little to no immediate capital needs and locations in highly desireable areas (relative to property type) in major markets.
What is the difference between core and non core real estate? ›
The characteristics of non-core properties are quite different from those of core properties. The latter consists of high quality assets that have high occupancy rates and provide steady cash flow. The investment profile of a core investment is similar to that of a bond, with reliable income streams and low volatility.
What is an example of real estate vs real property? ›
Real property is a legal term that refers to land and any buildings or other structures on it. It is also sometimes called real estate or immovable property. The land itself is considered real property, while any fixture or improvement on the land, such as a house or a fence, is considered personal property.
What is real estate an example of? ›
Real estate is a form of real property, meaning that it is something you own that is attached to a piece of land. It can be used for residential, commercial or industrial purposes, and typically includes any resources on the land such as water or minerals.
What are the two basic types of risk in real estate? ›
6 Types Of Real Estate Investment Risks That Investors Need To Know
- 1.1. Structural Risk:
- 1.2. General Market Risk:
- 1.3. Financial Risk:
- 1.4. Asset-Level Risk:
- 1.5. Legislative Risk:
- 1.6. Location Risk:
The U.S. Core Plus Bond strategy is a foundational fixed-income portfolio aimed at producing total return in excess of the Bloomberg Barclays U.S. Aggregate Bond Index. Key highlights of the strategy include: Deep credit expertise geared at sourcing timely relative-value opportunities across global fixed-income markets.
What is the core of strategies? ›
The prototypical core of a strategy is a dynamic process with problem-solving as its central aim. It involves selective attention, analysis of task, choice of decisions, execution of plan, monitoring of progress and/or modification of plan, and evaluation of result.
What is core plus bond portfolio management strategy? ›
Western Asset Core Plus Bond Strategy seeks to maximize total return from a high-quality, US domestic core fixed-income portfolio that can be enhanced by allocations to sectors such as high-yield, non-US and emerging market debt.
What is core plus in Fundrise? ›
A fund following a core plus strategy will invest in properties that usually need minor improvements to bring the property to a level at which it can maximize its profit earning potential.
