Clone Fund

As the name indicates the clone fund is a replica of a larger mutual fund. The clone fund tries to replicate the benefits and the reimbursements of a larger mutual fund. A clone fund is usually setup by the mutual fund issuing company if the original and the larger fund is becoming too difficult to handle or to manage efficiently. Some other companies also offer clone funds as they want to introduce some different pricing structure to their clients. For example in Canada clone funds are considered to be those specific funds that use the derivative concept to bypass the restriction associated with foreign content that was associated previously to the retirement accounts of the individuals.

The major objective of a clone fund is to match its performance to the original and larger mutual fund. However the actual performance of the clone mutual fund may vary due to a number of different factors such as the expertise of the portfolio manager. This means that performance of the clone fund and the original fund may vary if the portfolio managers of both the funds are different. Moreover the performance of the funds also depends upon the way with which these funds were executed, the trading style of the funds and the investment style associated with the funds.  Clone funds were the one of the most used investment option in Canada back in year 2005.

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