Enhanced index fund

Enhanced Indexing

A portfolio management strategy that mainly tracks a certain index but is designed to perform slightly better than that index. Typically, enhanced indexing involves holding roughly the same securities as the index in roughly the same proportion; however, the portfolio manager often overweights certain stocks or industries if he/she believes them to be undervalued. This process is called tilting. See also: Enhanced index fund.

Enhanced index fund.

An enhanced index fund chooses selectively among the stocks in a particular index in order to produce a slightly higher return. By contrast, an index fund strives to mirror the performance of a particular index by owning all the stocks in the index.

The goal is to narrowly beat the index anywhere from a fraction of a percent to two percentage points, but not more. A wider spread would classify the enhanced fund as an actively managed mutual fund rather than an index fund.

Enhanced index fund managers may achieve higher returns by identifying the undervalued stocks in the index. Or they might adjust holdings to include a larger proportion of securities in higher performing sectors, or use other investment strategies, such as buying derivatives.

While enhanced index funds may expose you to the risk of greater losses than their plain-vanilla counterparts, they may also offer an opportunity for higher returns.

References in periodicals archive ?
The indexed investment sector, including index mutual funds, enhanced index funds, exchange-traded funds (ETFs), and closet indexers, has experienced rapid growth over the past two decades.
Our sample of passive institutional investors consists of 591 index funds, enhanced index funds, ETFs, and a number of closet indexers.
We offer tax-aware investments, separate account wraps, insurance funds, cash products and actively managed and enhanced index fund product offerings," says Gatch.
Vincent Costa, CFA, Portfolio Manager, and Head of Quantitative Equity Research, is responsible for leading the portfolio implementation effort for all equity index funds and enhanced index funds.
He is also a director of Enhanced Index Funds, an umbrella fund
The London-based bank attributed the asset increase to its expanding hedge fund business and its enhanced index funds.
NextStep's independence and "advisor-friendly" business model - along with its ability to provide access to key investment options such as institutional class funds, a broad array of index and enhanced index funds, and exchange traded funds (ETFs) - make it an appealing choice for advisors and TPAs in need of low-cost and transparent investment options for their clients.
Fidelity Lowers Investment Minimums on 16 Index Funds and Six Enhanced Index Funds, And Reduces Expenses on Eight Index Funds to Among Lowest in Industry
6 trillion in managed assets, including more than $100 billion in index assets1, today announced it has significantly lowered the investment minimums on 22 equity, fixed income and enhanced index funds.
The majority of ProFunds are categorized by Lipper as enhanced index funds.
The Fund is managed by MLIM's quantitative investment team led by portfolio manager Vincent Costa, who has over 18 years of investment experience in index funds, enhanced index funds and hedge funds.
Enhancement is provided by the EIP Overlay Fund, a market neutral Asia ex-Japan hedge fund, which has a captive stock lending arrangement with the Enhanced Index Funds, in return for a share of the positive performance of the hedge fund.

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