Enhanced Index Fund - EIF

AAA

DEFINITION of 'Enhanced Index Fund - EIF'

A mutual fund that tracks a stock market index, but with certain modifications in place to allow for more equivalent position sizes, the exclusion of certain securities, or the use of leverage, all with the goal of beating the return of the tracking index. These types of funds are actively managed, and will often use the S&P 500 Index as the tracking index.

INVESTOPEDIA EXPLAINS 'Enhanced Index Fund - EIF'

Enhanced index funds trade with the "index fund" title, but to be fair, that's where the similarity usually ends. True index funds have consistently lower fees, lower turnover and passive management. Enhanced index funds, on the other hand, are actively managed to beat the return of the tracking index. This approach causes relatively higher fees and turnover than the traditional index fund. While proponents of enhanced index funds cite better total return performance as a plus for this type of fund, investors need to be aware that using leverage and active management also increases risk, at least as compared to a conventional index fund.

RELATED TERMS
  1. Expense Ratio

    A measure of what it costs an investment company to operate a ...
  2. Passive Management

    A style of management associated with mutual and exchange-traded ...
  3. Leverage

    1. The use of various financial instruments or borrowed capital, ...
  4. Active Management

    The use of a human element, such as a single manager, co-managers ...
  5. Index Fund

    A type of mutual fund with a portfolio constructed to match or ...
  6. Standard & Poor's 500 Index - S&P ...

    An index of 500 stocks chosen for market size, liquidity and ...
RELATED FAQS
  1. Are so-called self-offering and self-management covered by "Financial Instruments ...

    As the Financial Services Agency (FSA) explains, self-offering of interests in collective investment schemes falls under ... Read Full Answer >>
  2. What happens when I want to sell my A-shares of a mutual fund?

    Typically, commissions or other sales charges may apply when a mutual fund is sold. This is an important factor in deciding ... Read Full Answer >>
  3. What does the information ratio tell about the design of a mutual fund?

    The information ratio can tell an investor how well a mutual fund is designed to deliver excess or abnormal returns as well ... Read Full Answer >>
  4. Is it better to buy A-shares or a no-load mutual fund?

    Mutual funds and other pooled investments are popular among investors because they provide a level of diversity and professional ... Read Full Answer >>
  5. Are Class A mutual funds a better choice for long-term investments or short-term ...

    A shares are a particular class of mutual funds available to investors, usually through financial advisers. This class of ... Read Full Answer >>
  6. What are the best free online resources to compare no-load mutual funds?

    Morningstar, Inc. is a well-known investment research firm that offers extensive market data and stock and mutual fund analysis. ... Read Full Answer >>
Related Articles
  1. Mutual Funds & ETFs

    The Hidden Differences Between Index Funds

    These funds don't all match index returns. Find out how to avoid costly surprises.
  2. Mutual Funds & ETFs

    Enhanced Index Funds: Can They Deliver Low-Risk Returns?

    These funds may look appealing. Find out whether they can really live up to all of their promises.
  3. Options & Futures

    The Lowdown On Index Funds

    If you can't beat the market, why not join it? Read on to go over your options.
  4. Mutual Funds & ETFs

    Index Investing

    Get to know the most important market indices and the pros and cons of investing in them.
  5. Mutual Funds & ETFs

    Looking To Invest In Texas? Here Is How

    Ranging from energy to household names, here are some of the top investment opportunities in Texas.
  6. Professionals

    Indexing vs. Stock Picking: Which is Better Now?

    Indexing and stock picking both have positive and negative features. One has outperformed the other historically, but which is the better option right now?
  7. Investing Basics

    What Does a Financial Intermediary Do?

    A financial intermediary is an institution that acts as a go-between in a financial transaction.
  8. Mutual Funds & ETFs

    4 Ways You Can Invest In Gold Without Holding It

    Owning gold can be a store of value and a hedge against unexpected inflation. Holding physical gold, however, can be cumbersome and costly. Fortunately, there are several ways to own gold without ...
  9. Savings

    Get Better Mileage Out Of Your Savings At The Pump

    U.S. drivers are spending 90 cents less on a gallon of gas than a year ago, about more than $10 a tank. If that’s you, what are you doing with that money?
  10. Professionals

    Fund Boards: What They Do and Why You Should Care

    Fund boards oversee management and operations of the fund on behalf of shareholders. Make sure you've got a board that will look out for you.

You May Also Like

Hot Definitions
  1. Treasury Yield

    The return on investment, expressed as a percentage, on the debt obligations of the U.S. government. Treasuries are considered ...
  2. Bund

    A bond issued by Germany's federal government, or the German word for "bond." Bunds are the German equivalent of U.S. Treasury ...
  3. European Central Bank - ECB

    The central bank responsible for the monetary system of the European Union (EU) and the euro currency. The bank was formed ...
  4. Quantitative Easing

    An unconventional monetary policy in which a central bank purchases private sector financial assets in order to lower interest ...
  5. Current Account Deficit

    A measurement of a country’s trade in which the value of goods and services it imports exceeds the value of goods and services ...
  6. International Monetary Fund - IMF

    An international organization created for the purpose of: 1. Promoting global monetary and exchange stability. 2. Facilitating ...
Trading Center
×

You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!