About Closed-End Funds
Closed-end fund shares are not redeemable, but instead are traded in the secondary market on an exchange such as the New York Stock Exchange or the NASDAQ. They frequently trade at a discount to net asset value. Specialized funds may carry additional risks.
Closed-End Funds Q&A
Q: What is a closed-end fund?
A: A closed-end fund is an investment company that issues a fixed number of shares through an initial public offering (IPO).
The combined assets are professionally managed and contain a portfolio of securities. After the IPO, closed-end fund shares
trade in the secondary market, either on an exchange or on the over-the-counter market, much like a stock. The trading price
of the fund's shares is determined by its market price, not by the fund's net asset value (NAV).
Q: What is the difference between a closed-end fund and an open-end fund?
A: Open-end funds continuously sell and redeem shares for investors. Closed-end funds sell a fixed number of shares once,
in an initial public offering. Closed-end fund shares cannot be redeemed directly, only sold in a secondary market, typically
the Nasdaq or NYSE. Open-end fund share prices are determined by the fund's net asset value (NAV) and are calculated at the
end of each business day. Closed-end fund share prices fluctuate throughout the day, as they are driven by market price, which is determined by supply and demand on a stock exchange.
Q: What is the difference between a closed-end fund and an open-end fund that is closed?
A: Closed-end funds initially issue a fixed number of shares, which are then bought and sold in the secondary marketplace. Closed funds are open-end funds that no longer allow new investors into the fund. This often happens when assets become too large to manage.
Q: What is the difference between net asset value (NAV) and market price?
A: Per share net asset value (NAV) is the current value of all the fund's assets (less liabilities), divided by total shares outstanding. Market price is the price an investor pays or receives when they purchase or sell shares of a closed-end fund. Again, this price is determined by supply and demand for the closed-end fund on a stock exchange.
Q: What does it mean when a fund trades at a discount or premium?
A: A premium occurs when the market price of a closed-end fund share is more than its net asset value (NAV). Conversely, a discount occurs when the market price of a closed-end fund share is less than its NAV. Since investors receive capital gains and dividend distributions on a per share basis, purchasing closed-end fund shares at a discount presents a unique opportunity for investors to receive a higher yield on their investment. Investors also benefit from buying shares at a discount when purchasing a set number of shares, because their cost is lower. In addition, when investors have a set dollar amount to invest, they get more shares when they buy at a discount.
SEC Section 16(a) Filings
Under Section 16(a) of the Securities Exchange Act of 1934, officers and directors of the Funds and the Funds' adviser are required to file beneficial ownership reports with the Securities Exchange Commission. By clicking on a name below, you can view the individual's filing directly from the SEC website.