What is a clone fund?

The clone fund is an investment strategy that includes duplicating the structure and performance of a similar index or fund. In most cases, this replication activity is achieved by applying derivatives to the clone fund. Once this strategy was considered a very popular approach to hitting the success of a better established mutual fund, it has become less common in recent years.

Many investors see a certain degree of benefits associated with clone fund access. Clone funds can often be secured at a lower price than mutual funds that serve as a model or standard for effort. It is expected that by following the same basic plan and structure as the model, the clone fund will have a better chance of replicating the success of investment. From this point of view, it is assumed that investing in clones carry a slightly lower degree of risk and at the same time opens the door for a greater degree of return.

In the past, many corporations would take advantage of the Fund's Clown Access as part of the income generation for pensionfalse. Since there was no restriction on whether mutual funds had to include a domestic or foreign mutual fund clone, it meant that the company could decide to invest in offers that may not meet the regulatory standards necessary for domestic offers. Certainly the potential for creating a great return was present, but in this particular application the chance of loss was also increased.

Today, many nations place some restrictions on the inclusion of investment in clone funds to retire and investment packages. Although it is still possible to invest in foreign offers, many countries now require no more than a fixed percentage of the total value of mutual funds to include clones. This helps to ensure that most of the investments used as part of the pension thplans are governed by the same regulations, thus demonstrating acceptable levels of risk.