What is a Clone Fund?
A clone fund essentially tries to match the performance of another successful fund by imitating the other fund’s strategy. It may be no more risky than that which it copies. Whether you consider it dishonest or not depends on your point of view. If the purpose of the fund is to mimic an index by purchasing derivatives, it becomes a useful way for investors to invest in an index without having to buy all the shares in the appropriate weights in order to copy the index itself. If a clone fund is simply copying another mutual fund’s strategy, then the investor is probably paying fees to a management team that really isn’t doing much managing at all.
The clone fund is an investing strategy that involves duplicating the structure and performance of a similar index or fund. In most cases, this replication activity is achieved with the application of derivatives to the clone fund. Once considered a very popular approach to piggybacking on the success of a better established mutual fund, the strategy has become less common in recent years. Many investors see some degree of benefit associated with a clone fund approach. Often, clone funds can be secured at a lower price than the mutual funds that serve as the model or standard for the effort. The expectation is that by following the same basic plan and structure as the model, the clone fund will have a greater chance of replicating the success of the investment. From this perspective, investing in clones is thought to carry a slightly lower degree of risk, while opening the door for a greater degree of return. In times past, many corporations would make use of a clone fund approach as p
” The clone fund is an investing strategy that involves duplicating the structure and performance of a similar index or fund. In most cases, this replication activity is achieved with the application of derivatives to the clone fund. Once considered a very popular approach to piggybacking on the success of a better established mutual fund, the strategy has become less common in recent years. . Many investors see some degree of benefit associated with a clone fund approach. Often, clone funds can be secured at a lower price than the mutual funds that serve as the model or standard for the effort.
