Successful Funds Spin Off Siblings

It was bound to happen. As baby boomers build their investment portfolios, they’ve created another baby boom of sorts in the mutual fund industry. Vanguard Windsor gave birth to Vanguard Windsor II, Nicholas Fund begat Nicholas II, Babson Enterprise spawned Enterprise II and Pioneer Fund nurtured Pioneer II.

Welcome to the world of sibling mutual funds. They’re members of the same fund family, share a name and usually follow the same investment philosophy.

Still, many have significant differences that impact performance. The original fund’s portfolio manager - the most important variable - may or may not manage the sibling. The investment strategy for the sibling, which determines what kind of shares it buys, may differ considerably from the original. And because sibling funds are usually smaller, they may charge higher fees.

Before enthusiastically embracing a sibling, investors should compare the track records of each fund and its sibling and seek additional information about both from an independent source.