Measure for measure: How to track your tracker fund

When it comes to passive funds, the theory is simple: choose an index that provides access to the geography, industry, theme or asset class you want, and select a fund that replicates the underlying index as closely as possible. But in practice, replication is nuanced and judging a fund's ability to follow the index can take a trained eye. Two of the main ways that funds advertise their performance compared to an index is through tracking error and tracking difference. These terms are sometimes (incorrectly) used interchangeably, but whilst they are related, they are two different measur...