Closet tracker

A closet tracker is a fund that is supposedly actively managed, but that is nonetheless run in a very conservative manner that makes it little different from a tracker fund. The tracking error of a fund is a good indication of how actively managed (or not) it is.

Investors are generally better off investing in a genuine tracker fund for two reasons:

1. A real tracker fund will charge (lower) tracker fund level fees.
2. A real tracker fund will track its chosen index very accurately.

A closet tracker is not just a tracker fund, it is usually an expensive and sloppily run tracker fund.

Many supposed active funds are also in fact run as a combination of a closet tracker with a (often smaller) real active fund. Again, investors pay over the odds as they pay active management fees on their whole investment, but only part of it is really actively managed.