Skip to content
SuperMoney logo
SuperMoney logo

Core plus: Investment Strategy, Examples, Pros & Cons

Last updated 03/28/2024 by

Alessandra Nicole

Edited by

Fact checked by

Core plus is an investment management style that allows managers to enhance a core base of holdings with instruments offering greater risk but greater potential return. This article delves into core plus strategies, associated primarily with fixed income funds, and also explores core plus equity funds. Examples of core plus investments such as the JPMorgan Core Plus Bond Fund and the American Century Core Plus Fund are provided to illustrate how these strategies are implemented in practice.

Compare Investment Advisors

Compare the services, fees, and features of the leading investment advisors. Find the best firm for your portfolio.
Compare Investment Advisors

What is core plus?

Core plus is an investment management style 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.

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, often riskier but potentially more rewarding than the fund’s core holdings.
Investment advisors in 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 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.
Here is a list of the benefits and the drawbacks to consider.
  • Allows managers to potentially enhance returns
  • Offers flexibility in portfolio construction
  • Can diversify risk
  • May introduce higher levels of risk
  • Requires active management
  • Performance can vary based on market conditions

Frequently asked questions

How do core plus funds differ from traditional core funds?

Core plus funds offer managers the flexibility to invest in higher-risk assets beyond the core holdings, potentially aiming for higher returns. Traditional core funds typically stick to a predetermined set of investments without the flexibility to deviate from the core strategy.

Are core plus funds suitable for conservative investors?

Core plus funds may not be suitable for conservative investors as they often involve higher levels of risk compared to traditional core funds. Conservative investors may prefer investments with lower risk profiles.

What types of investors are core plus funds suitable for?

Core plus funds may be suitable for investors who are willing to accept higher levels of risk in exchange for potentially higher returns. These investors typically have a higher risk tolerance and a longer investment horizon.

Key takeaways

  • Core plus is an investment strategy allowing managers to augment a core portfolio with higher-risk instruments for potentially greater returns.
  • These strategies are primarily associated with fixed income funds but can also be applied to equity funds.
  • Examples of core plus investments include the JPMorgan Core Plus Bond Fund and the American Century Core Plus Fund.

SuperMoney may receive compensation from some or all of the companies featured, and the order of results are influenced by advertising bids, with exception for mortgage and home lending related products. Learn more

Loading results ...

You might also like