Clone Fund

AAA

DEFINITION of 'Clone Fund'

A mutual fund that aims to replicate the performance or strategy of a larger, successful mutual fund. A clone fund may be set up by a mutual fund company when the original fund has grown too big to be managed efficiently, or if the company wishes to introduce a different pricing structure. In Canada, clone funds referred specifically to funds that used derivatives to bypass the foreign content restriction that previously existed in retirement accounts.

INVESTOPEDIA EXPLAINS 'Clone Fund'

While the investment objective of a clone fund is to match the performance of the original fund, its actual performance may differ, depending on a number of factors, such as whether the portfolio manager/s are the same for both funds, and the differences (if any) in investment style and trade execution for the two funds.


Clone funds were popular in Canada earlier because the amount of foreign content in registered retirement savings plans (RRSPs) was restricted, until a legislative change in 2005 eliminated the 30% foreign content limit. When the foreign content restrictions were in effect, a Canadian investor who wished to invest in the S&P 500, but was already at the 30% limit in his or her RRSP, could do so by investing in an S&P 500 clone fund offered by a number of Canadian mutual fund companies. While these funds were devised to replicate the performance of the S&P 500, they were classified as Canadian property since their main assets consisted of derivatives trading in Canada.

RELATED TERMS
  1. Mirror Fund

    A type of mutual fund, typically run by a life insurance company, ...
  2. Derivative

    A security whose price is dependent upon or derived from one ...
  3. Registered Retirement Savings Plan ...

    A legal trust registered with the Canada Revenue Agency and used ...
  4. Index Fund

    A type of mutual fund with a portfolio constructed to match or ...
  5. Mutual Fund

    An investment vehicle that is made up of a pool of funds collected ...
  6. Treasury Bill - T-Bill

    A short-term debt obligation backed by the U.S. government with ...
Related Articles
  1. Retirement

    Lazy Portfolio Strategies For Your RRSP

    Check out this cheap and easy way to secure good returns for the long term.
  2. Markets

    Company Clone Cost Reveals True Value

    Find out how calculating a reproduction cost for a company can beat out the dividend discount model.
  3. Home & Auto

    Subaccounts: As Good Their Clone Funds?

    Variable annuity subaccounts are virtual clones of mutual funds but they have their own CUSIP number and their historical performances are tracked separately.
  4. Mutual Funds & ETFs

    Mutual Fund Basics Tutorial

    Learn about the basics - and the pitfalls - of investing in mutual funds.
  5. Mutual Funds & ETFs

    The Impact of the Janus Market Timing Ruling

    A look at the impact of the Janus Supreme Court ruling on market timing.
  6. Mutual Funds & ETFs

    Why Mutual Funds Lose Their Five-Star Ratings?

    Ratings help people feel confident about their decision before purchasing. Morningstar’s rating system helps people to find and invest in mutual funds.
  7. Mutual Funds & ETFs

    PIMCO vs. BlackRock: Weighing Mega Fund Managers

    A look at the world's biggest bond manager and the world's largest asset manager.
  8. Professionals

    Are Alternative Mutual Funds, ETFs Right for You?

    Alternative mutual fund and ETFs are gaining popularity but are they a good idea for your regular Joe investor?
  9. Investing

    Active Funds: Getting What You Are Paying For?

    Fund investing could have hidden costs that can potentially make a big impact on your final return, particularly over the long-term.
  10. Brokers

    OptionsXpress Vs. OptionsHouse: Which One To Pick?

    OptionsXpress and OptionsBroker -- each offers a price mix and set of services suitable for certain investors based on their trade approach and priorities.

You May Also Like

Hot Definitions
  1. Fixed-Charge Coverage Ratio

    A ratio that indicates a firm's ability to satisfy fixed financing expenses, such as interest and leases. It is calculated ...
  2. Efficiency Ratio

    Ratios that are typically used to analyze how well a company uses its assets and liabilities internally. Efficiency Ratios ...
  3. Fixed Cost

    A cost that does not change with an increase or decrease in the amount of goods or services produced. Fixed costs are expenses ...
  4. Subsidy

    A benefit given by the government to groups or individuals usually in the form of a cash payment or tax reduction. The subsidy ...
  5. Sunk Cost

    A cost that has already been incurred and thus cannot be recovered. A sunk cost differs from other, future costs that a business ...
  6. Technical Skills

    1. The knowledge and abilities needed to accomplish mathematical, engineering, scientific or computer-related duties, as ...
Trading Center