Closed-end funds are: definition

A “closed-end fund,” legally known as a “closed-end company,” is one of three basic types of investment company. The two other basic types of investment companies are mutual funds (open-end investment companies) and Unit Investments Trusts (UITs).

Here are some of the traditional and distinguishing characteristics of closed-end funds:

– Closed-end funds generally do not continuously offer their shares for sale. Rather, they sell a fixed number of shares at one time (in an initial public offering), after which the shares typically trade on a secondary market, such as the New York Stock Exchange or the NASDAQ Stock Market.
– The price of closed-end fund shares that trade on a secondary market after the fund’s initial public offering is determined by market forces of supply and demand and may be greater or less than the shares’ net asset value (NAV).
– Closed-end fund shares generally are not redeemable. That is, a closed-end fund is not required to buy its shares back from investors upon request. Some closed-end funds, commonly referred to as interval funds, offer to repurchase their shares at specified intervals.
– The investment portfolios of closed-end funds generally are managed by separate entities known as “investment advisers” that are registered with the SEC.

Closed-end funds come in many varieties. They can have different investment objectives, strategies, and investment portfolios. They also can be subject to different risks, volatility, and fees and expenses.

 

Article 'Closed-end funds are: definition' published on May 5, 2018, 6:27 pm in 'Investing '. Leave a comment!

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