What is the Core Fund?
"Core" is generally used to express one of the real estate investment strategies. Core basically indicates relatively lower-risk strategy where expected or target return is subject to be stable operating income return with lower level of debt leverage. However, there is no common definition for the core or other strategy on a global level.
Under this situation, ARES lists the following classifications for fund's strategy in our "ARES Best Practice Guideline for Private Real Estate Fund (the Guideline)". J-REITs are considered as plain core funds in the Guideline, so they are included in the universe of AJPI and AJFI. As to the unlisted private funds, core and core-plus funds among the following classification table are included in the universe.
Classification by Fund Strategy
The fund aims to generate a target return mainly from rental income returns by income-producing property investments.
- Capital return is not considered as a main target return, but the fund takes a low to medium market risk.
Same as Core Fund, the fund aims to generate a target return mainly from rental income returns, but some from capital returns.
The fund aims to generate a target return mainly from rental income returns as well as capital returns by increasing the yield and value of undervalued properties.
- Generally, the value-added strategy has a higher risk than the Core and Core-plus strategy because the fund often invests in low yield properties with some physical obsolescence.
The fund aims to generate a target return mainly from capital returns by trading properties based on the market forecast.
- This is a higher risk strategy including adaptive reuse, bulk trade and M&As.