Closed-end funds
« on: February 06, 2019, 08:45:48 AM »
What is a closed end investment company?

A closed end investment company, i.e., closed-end fund,  is formed when someone sells shares in the company to investors, but instead of using those funds to produce widgets, the funds are used to buy shares of other public companies. These funds get their closed-end name from the fact that they usually do not issue additional shares for sale, nor do they typically purchase their own shares.

Investopedia™ defines closed-end funds as follows:

“A closed-end fund is organized as a publicly traded investment company by the Securities and Exchange Commission (SEC). Like a mutual fund, a closed-end fund is a pooled investment fund with a manager overseeing the portfolio; it raises a fixed amount of capital through an initial public offering (IPO). The fund is then structured, listed and traded like a stock on a stock exchange.”

A closed-end fund can trade at a value that is either greater or less than its net asset value.  Net Asset Value (NAV) equals the excess per share value of the fund’s assets over its liabilities.  Typically, closed ends fund trade rarely trade at their NAV due to due to market demand and supply forces, which is influenced by management track record, operational costs, etc.

If you invest in closed-end funds, please share your experience with visitors to this forum.

Thank you.