Our Recommended Broker

Get $50 in free trades.
Questrade Democratic Pricing - 1 cent per share, $4.95 min / $9.95 max FAQs
Learning Topics
Contact Us
FAQ Archive

What is the advantage of RRSP-eligible clone funds over regular RRSPs?

When it comes to registered retirement savings plans, clone funds can help an RRSP pack a global punch. Clone funds are 100-per cent RRSP-eligible products that use derivatives to mirror the return on a global mutual fund.

RRSP-eligible clone funds were created by the mutual fund industry to allow investors boost the foreign content in their RRSPs. When clone funds first entered the market in 1999, the foreign content limit was 20 per cent, the market was strong, and global investing was the buzzword. Investors with a worldly view flocked to the new exciting product during the RRSP season. Today, the novelty of clone funds seems to have worn off. The foreign content room has now increased to 30 per cent, which is a factor, along with increased market volatility and worldwide economic challenges. If increasing foreign content is part of your financial goal, then clone funds still offer a much broader scope in foreign investments. But clone funds also tend to be more expensive than regular RRSP vehicles and are not suitable for every investor. Most clone funds are based on actively managed global funds, whose returns reflect the stock selections of the funds' portfolio managers. Some clone products are based on indexed mutual funds that mirror the returns of a particular market index. Essential features of RRSP-eligible clone funds: To clone or not to clone: