The Evolution of Core Plus: What Have We Learned?

Abstract

With clients looking for incremental yield, higher returns, and more diversification, core-plus fixed-income managers are being given increasing leeway over the types of instruments and maximum allocations to various sectors. Although core has tended to experience some pain roughly every four years, the style has indeed added value over the last decade and a half. Despite occasional suppositions otherwise, the evidence indicates that core-plus managers are relatively active in tactically adjusting their portfolios. And although the plus sectors typically offer low correlations with equities, one needs to be willing to tolerate the fact that excess returns of the core-plus portfolio may at times experience high correlations with equities, credit events, and emerging market debt.