Closet Index Fund
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.
An investment method in which an individual develops a widely diversified portfolio of securities that achieves a performance level nearly identical to that of a broad-based market average yet claims the performance is the result of active management based on market expertise.