Clone Fund

A clone fund is a mutual fund that is shown to be actively managed, but in practice, tracks a much larger and successful mutual fund. A clone fund is usually created by a company when the original fund has become too big and cannot be properly managed. However, it can also be set up if a company wants to introduce a new pricing structure. Although the objectives of the parent fund and the clone are the same, there is different management that operates them. While the main objective of setting up a clone fund is to match its performance with the original fund, but sometimes they may differ in their actual performance. This can be based on a number of factors such as different portfolio managers for both the funds, difference in execution of trade and also the style of investment. Due to the limits imposed on foreign investments, clone funds were very popular in Canada.

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Edited and Updated 31st May 2014

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