If you have, say, 100 different funds in your "family", a few of them will inevitably have good performance records. You merge the others into those, then you start new funds to replaces those that have been merged out.
It's very clever, and it looks good in the rating books.
Yes, kind of like the S&P index does. Drops the ones that don't do well, and picks up a few that are doing better.
Richard W.