159:(ETFs), but there are important differences between these two kinds of security. The price of a closed-end fund's shares is completely determined by investor demand, and this price often diverges substantially from the NAV of the fund assets. In contrast, the market price of an ETF trades in a narrow range very close to its net asset value, because the structure of ETFs allows major market participants to redeem shares of an ETF for a "basket" of the fund's underlying assets. This feature could in theory lead to potential
1327:
1335:
190:
the belief that closed-end funds tend to attract less astute individual investors, rather than professional or institutional investors, and that individuals tend to be "noise traders", whose expectations about future returns are too high in some periods and too low in others, or who believe they have
183:
concerns that closed-end fund net asset values overstate the true market value of the underlying investments, for example because the fund holds illiquid securities (such as private placements or restricted stock), or because net asset value does not reflect capital gains taxes that will be incurred
172:
Closed-end fund shares often trade at prices that deviate from the market values of the securities in their portfolios. Such funds have a long history of trading at a discount to market value, although they may also trade at a premium. Reasons for the tendency towards discount pricing are thought to
163:
profits if the market price of the ETF were to diverge substantially from its NAV. The market prices of closed-end funds are often 10% to 20% higher or lower than their NAV, while the market price of an ETF is typically within 1% of its NAV. Since the market downturn of late 2008, a number of fixed
146:
Since stock in closed-end funds is traded like other stock, an investor trading them will pay a brokerage commission similar to that paid when trading other stocks (as opposed to commissions on open-ended mutual funds, where the commission will vary based on the share class chosen and the method of
134:
The amount of leverage a fund uses is expressed as a percent of total fund assets (e.g. if it has a 25% leverage ratio, that means that for each $ 100 of total assets under management, $ 75 is equity and $ 25 is debt). In some cases, fund managers charge management fees based on the total managed
99:
Closed-end fund shares are traded on stock exchanges, and can be purchased and sold through brokers at any time during market hours. An open-end fund can usually be traded only by transacting directly with the investment company that manages the fund, at a time of day specified by the investment
142:
Leveraged funds can seem to have higher expense ratios—a common way that investors compare funds—than their non-leveraged peers. Some investment analysts advocate that expenses attributable to the use of leverage should be considered a reduction of investment income rather than an expense, and
82:
Like their better-known open-ended cousins, closed-end funds are usually sponsored by a fund management company. The fund's charter, prospectus and the applicable government regulations specify the types of investments the fund manager is permitted to buy. Some funds invest in stocks, others in
103:
A closed-end fund usually trades at a premium or discount to the market value of its assets (known as net asset value, or NAV). In contrast, the price of an open-end fund cannot fall below net asset value, because the funds are required to transact with investors only at net asset
45:, is an investment vehicle fund that raises capital by issuing a fixed number of shares at its inception, and then invests that capital in financial assets such as stocks and bonds. After inception it is closed to new capital, although fund managers sometimes employ
131:. Leverage amplifies gains when the market prices of the fund's investments rise, but it also amplifies losses when market prices decrease. This increases the volatility of a leveraged fund's net asset value, compared with an unleveraged peer.
107:
Closed-end fund investors who wish to exit the investment can do so only by selling the funds' shares to other investors on stock exchanges. In contrast, open-end funds are redeemed directly by the fund at net asset
1314:
147:
purchasing the fund). In other words, closed-end funds typically do not have sales-based share classes with different commission rates and annual fees. The main exception is loan-participation funds.
187:
the practice of deducting fund expenses before dividends are distributed to investors, which makes the fund's yield lower than would be obtained by buying the identical stocks in the open market;
404:
432:
679:
592:
135:
assets of the fund, which includes leverage. This further reduces the income benefit of leverage to the common shareholder, while retaining the additional
180:
stockbrokers' reluctance to recommend closed-end funds to customers because other investments such as mutual funds generate higher sales commissions;
665:
1061:
954:
617:
218:
traded at a discount to net asset value during most of calendar year 2022 and all of 2023, according to the
American weekly financial newspaper
926:
1021:
194:
individual investors' tendency to sell closed-end funds near the end of the year, which causes discounts to widen near the end of the year.
1330:
899:- The Active Investment Company Alliance - Trade Association for Listed/Non-Listed closed end funds /business development companies
500:
68:
550:
418:
811:
712:
947:
275:
251:
222:. This average measures 15 equally-weighted closed-end funds based in the U.S. that invest primarily in U.S. equities.
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investor perception that the fund's management fees are too high, or that future performance will be disappointing;
17:
686:
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940:
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have opined that the various hypotheses put forth do not fully explain the persistence of discount pricing.
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119:(gearing) to obtain new money to invest after the fund's inception. This can be done by issuing
1289:
1203:
368:
Closed‐End Fund Shares' Abnormal
Returns and the Information Content of Discounts and Premiums.
337:
83:
bonds, and some in very specific things (for instance, tax-exempt bonds issued by the state of
53:
1103:
963:
838:
739:
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255:
245:
234:
76:
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989:
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8:
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566:
Braham, Lewis (May 1, 2023). "Closed-End Bond Funds Sell at Steep
Discounts". Barron's.
215:
116:
52:
In the United States, closed-end funds sold publicly must be registered under both the
46:
1129:
771:
593:"What is the difference between an ETF's net asset value (NAV) and its market price?"
546:
454:
359:
An
Investor Expectations Stock Price Predictive Model Using Closed-End Fund Premiums.
641:
1177:
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304:
124:
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295:: non-profit national trade association representing the closed-end fund industry
128:
120:
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893:– US Securities and Exchange Commission description of investment company types
865:"Tracking Closed-End Funds". Barron's Market Lab newsletter. December 31, 2022.
643:
308:
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1213:
1098:
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1036:
1001:
876:"Tracking Closed-End Funds". Barron's Market Lab newsletter. January 1, 2024.
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special information that provides them with insight about future trends; and
155:
Closed-end funds are traded on exchanges, and in that respect they are like
1299:
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1051:
361:
890:
492:
405:"What is the difference between an open-end and a closed-end mutual fund?"
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1031:
314:
219:
203:
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income ETFs have traded at premiums of roughly 2% to 3% above their NAV.
115:
Another distinguishing feature of a closed-end fund is the common use of
72:
31:
932:
1138:
1108:
1016:
1006:
111:
In the United States, a closed-end company can own unlisted securities.
646:. (March 1991). "Investor Sentiment and the Closed-End Fund Puzzle".
328:
199:
160:
49:
Investors can buy and sell the existing shares in secondary markets.
100:
company, and the dealing price will usually not be known in advance.
292:
344:
Managerial
Ability, Compensation and the Closed-End Fund Discount.
84:
95:
A closed-end fund differs from an open-end mutual fund in that:
896:
1083:
150:
63:
U.S.-based closed-end funds are referred to under the law as
920:
545:(eight ed.). New York: McGraw Hill/Irwin. p. 85.
618:"Boaz v BlackRock: Whoever wins, closed-end funds lose"
902:
230:
Among the biggest, long-running closed end funds are:
923:– Association of Investment Companies (UK trade body)
914:
911:– The Closed-End Fund Association member website (US)
908:
71:-recognized types of investment companies along with
791:
789:
787:
680:"Investor Sentiment and the Closed-End Fund Puzzle"
487:
485:
483:
1349:
784:
541:Bodie, Zvi; Kane, Alan; Marcus, Alan J. (2010).
1062:Qualifying investor alternative investment fund
540:
480:
184:when the fund sells the underlying investments;
948:
812:"Play the Closed-End Fund Game with the Pros"
713:"Play the Closed-End Fund Game with the Pros"
1022:Labour-sponsored venture capital corporation
917:– The US association of investment companies
664:: CS1 maint: multiple names: authors list (
590:
391:"An Introduction to Closed-End Mutual Funds"
536:
534:
532:
530:
453:. New York: McGraw Hill. pp. 340–341.
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151:Comparison to exchange-traded funds (ETFs)
90:
962:
167:
765:
527:
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501:U.S. Securities and Exchange Commission
439:
14:
1350:
905:– The Closed-End Fund Association (US)
637:
635:
565:
27:Professionally managed investment fund
936:
433:"Open-end vs Closed-end Mutual Funds"
770:. New York: McGraw-Hill. p. 8.
768:Herzfeld's Guide to Closed-End Funds
710:
448:
810:Forsyth, Randall (April 14, 2021).
632:
524:, §5.02 (Matthew Bender, 2014 ed.).
477:, §9.05 (Matthew Bender, 2014 ed.).
24:
642:Lee, Charles M.; Shliefer, Andre;
522:Regulation of Investment Companies
475:Regulation of Investment Companies
355:Frederic Palomino. September 1996.
311:closed-ended collective investment
276:General American Investors Company
252:Scottish Mortgage Investment Trust
25:
1374:
884:
1333:
1326:
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349:and Richard Stanton. April 2007.
209:
869:
858:
826:
803:
759:
727:
704:
672:
609:
584:
570:
559:
370:Greggory A. Brauer. March 1988.
353:Noise Trading in Small Markets.
1159:Socially responsible investing
1089:Split capital investment trust
927:Australian Stock Exchange site
514:
467:
425:
411:
397:
383:
198:However, financial economists
58:Investment Company Act of 1940
13:
1:
1047:Open-ended investment company
620:. The Economist Newspaper Ltd
493:"Closed-End Fund Information"
376:
299:Collective investment schemes
261:Tri-Continental Corporation (
1305:Returns-based style analysis
1068:Real estate investment trust
915:Investment Company Institute
766:Herzfeld, Thomas J. (1993).
244:Witan Investment Trust plc (
7:
1240:Efficient-market hypothesis
616:Buttonwood (May 25, 2024).
591:Investopedia (2015-05-28).
325:Listed investment companies
293:Closed-End Fund Association
286:
225:
216:Herzfeld Closed-End Average
10:
1379:
1079:Short-term investment fund
301:: for generic information.
29:
1323:
1282:
1227:
1186:
1122:
1027:Listed investment company
996:Fonds commun de placement
970:
543:Essentials of Investments
419:"Closed-end Mutual Funds"
143:publish adjusted ratios.
1363:Exchange-traded products
1235:Arbitrage pricing theory
30:Not to be confused with
1310:Traditional investments
1295:Commodity pool operator
1269:Noisy market hypothesis
1264:Modern portfolio theory
1114:Unitised insurance fund
1042:Open-ended fund company
984:Common contractual fund
520:Lemke, Lins and Smith,
473:Lemke, Lins and Smith,
91:Distinguishing features
1290:Alternative investment
1204:Institutional investor
846:Cite journal requires
747:Cite journal requires
648:The Journal of Finance
449:Thau, Annette (2001).
338:The Journal of Finance
268:Gabelli Equity Trust (
168:Discounts and premiums
77:unit investment trusts
67:and form one of three
54:Securities Act of 1933
43:closed-end mutual fund
1104:Unit investment trust
964:Investment management
833:"Lee et al p. 78-79".
336:Relevant articles in
235:Adams Express Company
157:exchange-traded funds
1094:Tax transparent fund
990:Exchange-traded fund
814:. Barron's/Dow Jones
701:accessed on 31/10/11
65:closed-end companies
1149:Manager of managers
1057:Private-equity fund
711:Forsythe, Randall.
1259:Martingale pricing
1169:Thematic investing
1134:passive management
734:"Lee et al p. 78".
41:, also known as a
1345:
1344:
1123:Investment styles
929:– Australian LICs
644:Thaler, Richard H
552:978-0-07-338240-1
16:(Redirected from
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1358:Investment funds
1337:
1336:
1329:
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1178:growth investing
1144:Impact investing
1012:Investment trust
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347:Jonathan B. Berk
305:Investment trust
202:, Alex Kane and
129:rights offerings
125:commercial paper
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18:Closed-end funds
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39:closed-end fund
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777:0-07-028435-0
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692:on 2010-07-06
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451:The Bond Book
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1300:Robo-advisor
1245:Fixed income
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1176: /
1132: /
1052:Pension fund
871:
860:
839:cite journal
828:
816:. Retrieved
805:
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767:
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740:cite journal
729:
717:. Retrieved
706:
694:. Retrieved
687:the original
674:
660:cite journal
654:(1): 75–109.
651:
647:
622:. Retrieved
611:
600:. Retrieved
597:Investopedia
596:
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505:. Retrieved
503:. 2013-01-16
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321:information.
315:Mutual funds
229:
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133:
114:
94:
81:
73:mutual funds
64:
62:
51:
42:
38:
36:
1274:Yield curve
1187:Terminology
1139:Hedge Funds
1032:Mutual fund
972:Investment
364:March 1993.
32:closed fund
1352:Categories
1109:Unit trust
1017:Hedge fund
1007:Index fund
976:structures
715:. Barron's
696:2010-12-01
602:2016-12-10
507:2015-12-16
377:References
137:volatility
1253:Convexity
329:Australia
200:Zvi Bodie
173:include:
161:arbitrage
47:leverage.
1331:Category
1249:Duration
287:See also
226:Examples
220:Barron's
117:leverage
56:and the
1064:(QIAIF)
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