A Closed-End Fund is a type of investment fund that issues a fixed number of shares through an initial public offering (IPO) and then trades on an exchange like a stock. Unlike Open-End Funds, the number of shares outstanding in a Closed-End Fund is fixed and can only be bought or sold on the exchange.
Closed-End Funds are managed by professional fund managers who invest the pooled money into various securities based on the fund’s investment objective. The fund’s net asset value (NAV) is calculated by dividing the total value of the fund’s assets by the number of outstanding shares.
The price of shares in a Closed-End Fund is determined by supply and demand on the exchange and may trade at a premium or discount to the NAV. The price of shares can be affected by market conditions, interest rates, and other factors.
Closed-End Funds offer investors the potential for income, capital appreciation, and diversification. They can invest in a wide range of asset classes, including stocks, bonds, and other securities. Closed-End Funds typically have higher expense ratios than Open-End Funds due to the costs of trading on an exchange.