What does 'Core Plus' mean

Core plus is an investment management style that permits managers to add instruments with greater risk and greater potential return to a core base of holdings with a specified objective. 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 may also exist with a similar strategy using alternative investing to enhance the return from a core market segment.

BREAKING DOWN 'Core Plus'

Core plus investment strategies are primarily associated with fixed income funds. They give a fixed income fund manager some flexibility to add additional return from investments beyond the core objective of a fund. Securities used for enhancing return are typically also fixed income investments with greater risk and return potential than the fund’s core holdings.

Investment advisors in a core plus fund will build its core holdings specifically around securities that meet a specified objective. This portion of the portfolio is designed to be maintained as a long-term holding 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 shorter investment horizons than the core components of the portfolio. As such, a portfolio's core investments would represent a solid foundation to which more aggressive, diversified investments could be added. 

Core Plus Investments

Below are some examples of core plus fixed income and equity investments.

JPMorgan Core Plus Bond Fund (ONIAX)

The JPMorgan Core Plus Bond Fund (ONIAX) is one core plus fixed income example. The Fund invests primarily in investment grade bonds. It has the flexibility to tactically invest 35% of the portfolio’s assets in securities outside the central objective that have enhanced return potential. The Fund typically invests enhancement assets in high yield fixed income and foreign debt. As of September 30, 2017 total assets in the Fund were $9.69 billion. The class A share of the Fund requires a minimum investment of $1,000. The Fund has a gross annual expense ratio of 0.93%.

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 bonds with two to four year durations. The Fund also invests in alternative fixed income investments outside of the core holdings for added return. The Fund’s investor share has a $2,500 initial investment requirement. The Fund has a total expense ratio of 0.68%.

JPMorgan U.S. Large Cap Core Plus Fund (JLCAX)

The JPMorgan U.S. Large Cap Core Plus Fund is one example of an equity core plus fund. The Fund centers the majority of its core holdings around U.S. large cap companies. It also has the ability to sell short U.S. large cap stocks to achieve additional return.

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