| Clone Fund |
A mutual fund that replicates the performance or strategy of an existing mutual fund or index through the use of derivatives.
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These are common in Canada, where investors are limited to the amount of foreign investment in Registered Retirement Savings Plans (RRSP). For example, say a Canadian investor wants to buy an S&P 500 index fund (a foreign investment) in his RRSP, but does not have any more room for foreign content. To get around the foreign content restrictions the investor can buy an S&P 500 clone fund, which replicates the performance of the S&P 500 but is classified as a Canadian security because it's composed of derivatives trading in Canada.
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Mutual Fund Basics Tutorial - Learn about the basics--and the pitfalls!--of investing in mutual funds. |
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