A closed-end fund is a type of collective investment scheme with a limited number of shares that are not redeemable from the fund manager. By contrast, an open-end fund does not have a limit on the number of shares that can be issued, and shares can be redeemed at any time at the fund's net asset value.
The key difference between closed-end and open-end funds is that closed-end funds trade on a stock exchange, while open-end funds do not. This means that the price of a closed-end fund's shares can be higher or lower than the fund's net asset value, while the price of an open-end fund's shares will always equal the fund's net asset value.
Another difference between the two types of funds is that closed-end funds typically have a fixed number of shares, while open-end funds can issue new shares as needed. This means that closed-end funds can be subject to supply and demand dynamics, which can lead to the shares trading at a premium or discount to the fund's net asset value.
What are the key differences between closed ended and open-ended schemes?
The key difference between closed-ended and open-ended schemes is that in a closed-ended scheme, the fund has a fixed number of units which are not redeemed by the fund house, whereas in an open-ended scheme, the fund house creates and redeems units as per the demands of the investors.
Another key difference between the two types of schemes is that in a closed-ended scheme, the fund is listed on a stock exchange and is traded like a share, whereas in an open-ended scheme, the units are not traded on a stock exchange.
Lastly, closed-ended schemes have a lock-in period, whereas open-ended schemes do not have a lock-in period. Do closed-end funds have NAV? Closed-end funds do not have NAV because they are not required to redeem their shares at net asset value. Instead, closed-end fund shares are traded on a stock exchange and can trade at a premium or discount to their net asset value. What is an example of a closed-end fund? A closed-end fund is a mutual fund that raises a fixed amount of capital through an initial public offering (IPO) and then trades on a stock exchange. Unlike an open-end fund, which can issue new shares or redeem existing shares at any time, a closed-end fund can only issue new shares through a secondary offering.
An example of a closed-end fund is the Blackstone / GSO Strategic Credit Fund, which is managed by Blackstone Group LP and GSO Capital Partners LP. The fund was launched in December 2014 and raised $2.25 billion in its IPO.
What are the sources of return from an investment in a closed-end investment company? The investment return of a closed-end investment company (CEIC) is generated in two ways: through income from the securities it holds in its portfolio, and through capital gains or losses from the sale of these securities.
The income component of CEIC returns comes from the dividends and interest payments received on the securities held in the fund's portfolio. For equity CEICs, this income is in the form of dividends paid by the companies in which the fund has invested. For fixed income CEICs, this income is in the form of interest payments received on the bonds held in the fund's portfolio.
The return from capital gains or losses is generated when the fund sells securities that have appreciated in value since they were purchased (resulting in a capital gain) or when the fund sells securities that have declined in value since they were purchased (resulting in a capital loss).
Do closed-end funds have a maturity date? Closed-end funds are a type of mutual fund that trade on an exchange like a stock. They are not redeemable at the net asset value per share like traditional mutual funds. Because they trade on an exchange, the market price of a closed-end fund may be higher or lower than the net asset value per share.
Closed-end funds typically have a stated maturity date, after which the fund is liquidated and the proceeds are distributed to shareholders. The maturity date is set at the time the fund is launched. For example, a fund with a five-year stated maturity will be liquidated and distributed to shareholders five years after it is launched.
While closed-end funds have a stated maturity date, this does not mean that shareholders will automatically receive their money back at that time. If the market price of the fund is below the net asset value per share at the time of maturity, shareholders will only receive the market price of the fund, not the net asset value per share.
It is important to note that the stated maturity date is not the same as the effective maturity date. The effective maturity date is the date on which the fund's assets are actually due to be paid out. This date may be different from the stated maturity date if the fund's assets are illiquid or if the fund is unable to pay out the full amount owed to shareholders at the stated maturity date.