Index Hugger

Index Hugger

Informal for a closet index fund, which is a mutual fund that is actively-managed in theory, but more or less tracks a benchmark stock index. Index huggers exist because their managers believe it is safer to generally track indices than to take on the greater risks incumbent with more active management. Index huggers do not advertise themselves as such, but one may determine whether a mutual fund is one by comparing its R square to a given index. Some advisors recommend staying away from index huggers because they carry fees and commissions associated with mutual funds, when one can directly invest in an index for less expense while achieving roughly the same return.