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%.
