Clone Fund

Warren Buffett’s reputation as one of the most savvy stock investors in history is unparalleled. His Berkshire Hathaway has become the envy of many, and it remains a classic model upon which many a portfolio has attempted to emulate, not only in performance, but in composition. Funds that attempt to copy the structure and performance of other funds are referred to as "clone funds."

The mutual fund and Exchange-Traded Fund (ETF) arenas are especially prone to cloning at times, because rival families of funds, such as Vanguard, iShares, and Fidelity, are all competing for market share, and thus feel compelled to offer access to at least one fund within their menu of offerings that can satisfy discriminating investors for each and every category.

Funds that are predicated on tracking and matching or exceeding the performance of a particular benchmark index are the primary clone funds of reference, since they are usually uniformly equivalent to these indexes on a proportionate scale by at least 80% or more.

Given that every industrial sector has a benchmark index, funds designed to track each index make sense from a marketing demographic perspective, since the funds are likely to have greater experience and market sophistication than average individual investors. It's a way for investors to get exposure in a particular sector without having to do the heavy research and monitoring ordinarily required if making such an investment unaided.

In addition to large stakes in Goldman Sachs, Coca Cola, and Heinz, Berkshire Hathaway also owns many private companies and subsidiaries, such as Spalding Sporting Goods, See’s Candy, Fruit of the Loom clothing, and GEICO. Buffett apparently is flattered by clone funds, although he reportedly is not fond of attempted clones of his GEICO gecko and caveman characters.