RA asked in Business & FinanceInvesting · 1 decade ago

What is a closed-end fund?

5 Answers

Relevance
  • 1 decade ago
    Favorite Answer

    A mutual fund is a pooled investment, where investors send in their money into a single pot and a professional manager invests it into stock or bonds according to the principles spelled out in the prospectus. Implicit in a mutual fund is the promise that every day the investment manager will accept more money from investors OR redeem the shares from investors at the net asset value. Net asset value (NAV) is the total amount invested in the fund divided by the number of outstanding shares.

    In a closed end fund, the fund manager will no longer accept new monies, NOR will he redeem the shares from investors. To make a market in those shares they are often listed on the New York stock exchange or in another publicly traded market. They are then sold there at whatever price another investor is willing to pay for them. The sales price of these shares may be more or less than the actual NAV of the fund shares, but they are more likely to be sold at a discount (less than NAV). I hope this explains it.

  • Anonymous
    1 decade ago

    A closed end fund is like an apple pie. You have a shell and you put the apples in. That's like the fund, you put the investment money in...a set amount like $2 billion dollars. When it is full of apples, or money, you seal it up. Then you slice it into pieces and sell it to people. If they don't want their slice anymore, they can sell it to someone else. But the piece of pie stays intact. This differs from an open end fund where the cook can take the apples back out if someone doesn't want the pie any more.

  • 1 decade ago

    a close-end fund is an investment fund that does not issue new participations. this means its a set amount of shares bought by several people, united in a fund. These people will not be able to invest more into the fund unless they buy an existing investor out.

  • 1 decade ago

    A closed end fund is a fund that is a fixed pool of money run by a manager. Closed end funds often trade at a discount but tend to be illiquid. I am a big fan of closed end funds.

    Source(s): Make money in closed end funds http://hubpages.com/hub/closed-end-money
  • How do you think about the answers? You can sign in to vote the answer.
  • 1 decade ago

    A mutual fund is the most common example. Its where, the fund has a certain amount of shares, and this does not change. With a corporation, they could offer more stock, so that is not closed end. Also, their value is calculated at the end of the day. With a mutual fund, you buy it at what it closed at the previous day. A stock price fluctuates during the day.

Still have questions? Get your answers by asking now.