closed-end funds and open end funds ?
b.How does the pricing of shares of a close end fund differ from the pricing of shares of an open-end fund (mutual fund)?
- Renaissance manLv 41 decade agoFavorite Answer
Closed funds have a set number of shares that does not change after the IPO (initial public offering). Since no additional shares are offered for sale, from that point, the price of the shares changes solely according to the valuation of the portfolio of investments selected by the fund managers. These shares are traded on the secondary market. In other words, they trade on an exchange just like a shares of a publicly held corporation.
Open ended funds continuously offer shares for sale until such time as the fund managers elect to close the fund to new investors. This decision is typically made when the fund gets extremely large. After that point, current shareholders are sometimes allowed to continue purchase additional shares, but no new investors may participate. Shares for these funds are NOT traded on the secondary market. You must buy them through a broker or directly from the fund in some cases.
I've added a couple of links from the SEC that help explain these popular investment instruments.Source(s): former financial services professional http://www.sec.gov/answers/mfclose.htm
- hensleeLv 44 years ago
there is of route no effortless solutions both have there own merrits.. The mutual fund comes with an IPO and later it starts putting ahead NAV depending on the sources that that's coping with, e.g. a fairness fund might want to caculate NAV depending on its underlying marketplace value of the securities that's preserving, with marketplace fluctating NAV will decision. An open ended fund, is the the position in you may both purchase or promote the fund depending prevailing markets (with prices at the same time with get admission to or go out load) as in preserving with the rules of the fund in question. on the cotrary the close ended fund typically is for diverse era in this era you may't purchase or promote the fund. Open ended fund provides liquidity. on the different close ended fund fund do no longer provide liquidity, even with the undeniable fact that the fund manager can take lengthy time period view and for this reason achieveable benefiet to investor in lengthy time period. enable us say marketplace is down as a results of panic information, and if the mutual fund manager feels its correct time to purchase with lengthy time period horizon, yet open-ended MF manger cant benefit this, it truly is exat time at the same time as traders flock and performance no funds to make investments actually to satisfy liquidity requirement he has to promote. Open ended funds continually might want to wrestle the liquidity difficulty. typically higher fund length take care of this better proper with length. the answer relies upon on your funding purpose, opt for of liquidity and so on.