A closed-end fund is a collective investment scheme that has a fixed number of shares. Unlike open-end funds, new shares/units in a closed-end fund are not created by managers to meet demand from investors.
Some characteristics that distinguish a closed-end fund from an ordinary open-end mutual fund are that:
- it is closed to new capital after it begins operating, and
- its shares (typically) trade on stock exchanges rather than being redeemed directly by the fund.
- its shares can therefore be traded at any time during market opening hours. An open-end fund can usually be traded only at a time of day specified by the managers, and the dealing price will usually not be known in advance.
- it usually trades at a premium or discount to its net asset value. An open-end fund trades at its net asset value (to which sales charges may be added; and adjustments may be made for e.g. the frictional costs of purchasing or selling the underlying investments).
- in the United States, a closed-end company can own unlisted securities.