C. Edward Chang, Thomas Krueger

Do enhanced index funds live up to their name?

Introduction

Do enhanced index funds live up to their name?. Enhanced index funds (EIFs) often underperform pure index funds with lower returns, higher risks & expenses. Don't fall for sales pitches – compare performance now!

Abstract

Uninformed investors would expect enhanced index funds (EIFs) to live up to their name and enhance portfolio performance. This updated and thorough comparison of EIFs and pure index funds finds that EIFs, as a whole and in domestic stock fund categories, appear to have performed worse than their pure index funds counterpart with lower returns, higher risks and lower risk-adjusted returns. EIFs behaved more like actively managed funds, with higher expense ratios and turnover rates. Investors should be wary of sales pitches hyping the value of EIFs!

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