The price of a closed-end fund fluctuates according to supply and demand, as well as the changing values of its portfolio’s holdings. Related Terms Open-End Fund An open-end fund is a mutual fund that can issue unlimited new shares, priced daily on their net asset value. A premium might be caused by the market’s confidence in the investment managers’ ability or the underlying securities to produce above-market returns. The investors are given shares corresponding to their initial investment. Reprinted with permission from Morningstar, Inc. Funds may use a combination of leveraging tactics or each individually. Thus it may become overweight in the shares of lower perceived quality or underperforming companies for which there is little demand.
Definition
A closed-end fund is a portfolio of pooled assets that raises a fixed amount of capital through an initial public offering IPO and then lists shares for trade on a stock exchange. Like a mutual fund, a closed-end fund has a professional manager overseeing the portfolio and actively buying and selling holding assets. Similar to an exchange-traded fund, it trades like equity, as its price fluctuates throughout the trading day. However, the closed-end fund is unique in that, after its IPO, the fund’s parent company issues no additional shares. Nor will the fund itself redeem—buy back—shares. Instead, like individual stock shares, the fund can only be bought or sold on the secondary market by investors.
Mutual Funds and Mutual Fund Investing — Fidelity Investments
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Why are they called «closed-end» funds?
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The word in the example sentence does not match the entry word. The sentence contains offensive content. Cancel Submit. Your feedback will be reviewed. FINANCE an investment fund in which shares in the fund can be bought and soldbut no new shares are made available :. The price of a share in a closed-end fund is determined partially by the value of the investments in the fundand partially by the premium placed on it by the market.
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Open-end vs Closed-end Mutual Funds
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While a closed-end fund has several unique characteristics that distinguish it from an open-end fundsuch as a mutual fund or exchange-traded fund ETFit also shares several similarities with those two securities. In doing so, the fund manager hopes to earn a higher return with this additional invested capital. A CEF can trade at a premium at some times, and a discount at other times. Some advantages of closed-end funds over their open-ended cousins are financial. After all the shares sell the offering is «closed»—hence, the. ETF: What’s the Difference? They begin by soliciting money from investors in an initial offering, which may be public or limited. But unlike mutual funds, CEFs are closed in the sense that capital does not regularly flow into them when investors buy shares, and it does not flow out when investors sell shares. A fund raises its initial equity through the sale of common stock. A percentage value for helpfulness will display once a sufficient number of votes have been submitted.
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