A
mutual fund that is
actively managed in theory, but more or less tracks a
benchmark stock index. Closet index funds generally exist because their managers believe it is safer to generally track indices rather than take on the greater
risks incumbent with more active management. Closet index funds 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 counsel staying away from closet index funds as they carry
fees and
commissions associated with mutual funds, and one can directly
invest in an index for less
expense, while achieving the same result.