148:(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
1316:
1324:
179:
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
172:
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
161:
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
152:
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
135:
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
123:
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
88:
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
131:
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
71:
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
92:
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
34:, 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
120:. 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.
1303:
96:
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
136:
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.
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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;
654:
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943:
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1010:
421:
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assets of the fund, which includes leverage. This further reduces the income benefit of leverage to the common shareholder, while retaining the additional
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stockbrokers' reluctance to recommend closed-end funds to customers because other investments such as mutual funds generate higher sales commissions;
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57:
606:
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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
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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.
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264:
240:
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888:- The Active Investment Company Alliance - Trade Association for Listed/Non-Listed closed end funds /business development companies
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929:
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46:
800:
701:
1035:
1293:
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287:
211:. 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;
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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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108:(gearing) to obtain new money to invest after the fund's inception. This can be done by issuing
357:
Closed‐End Fund Shares' Abnormal
Returns and the Information Content of Discounts and Premiums.
72:
bonds, and some in very specific things (for instance, tax-exempt bonds issued by the state of
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Braham, Lewis (May 1, 2023). "Closed-End Bond Funds Sell at Steep
Discounts". Barron's.
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41:
In the United States, closed-end funds sold publicly must be registered under both the
1340:
1237:
1202:
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582:"What is the difference between an ETF's net asset value (NAV) and its market price?"
348:
An
Investor Expectations Stock Price Predictive Model Using Closed-End Fund Premiums.
307:
1288:
1233:
1040:
350:
284:: non-profit national trade association representing the closed-end fund industry
1262:
1020:
303:
208:
192:
61:
20:
882:– US Securities and Exchange Commission description of investment company types
854:"Tracking Closed-End Funds". Barron's Market Lab newsletter. December 31, 2022.
1127:
1097:
1005:
995:
865:"Tracking Closed-End Funds". Barron's Market Lab newsletter. January 1, 2024.
317:
188:
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special information that provides them with insight about future trends; and
149:
144:
Closed-end funds are traded on exchanges, and in that respect they are like
879:
481:
394:"What is the difference between an open-end and a closed-end mutual fund?"
153:
income ETFs have traded at premiums of roughly 2% to 3% above their NAV.
104:
Another distinguishing feature of a closed-end fund is the common use of
921:
100:
In the United States, a closed-end company can own unlisted securities.
73:
635:. (March 1991). "Investor Sentiment and the Closed-End Fund Puzzle".
38:
Investors can buy and sell the existing shares in secondary markets.
89:
company, and the dealing price will usually not be known in advance.
281:
1072:
333:
Managerial
Ability, Compensation and the Closed-End Fund Discount.
84:
A closed-end fund differs from an open-end mutual fund in that:
925:
885:
52:
U.S.-based closed-end funds are referred to under the law as
909:
534:(eight ed.). New York: McGraw Hill/Irwin. p. 85.
607:"Boaz v BlackRock: Whoever wins, closed-end funds lose"
891:
219:
Among the biggest, long-running closed end funds are:
912:– Association of Investment Companies (UK trade body)
903:
900:– The Closed-End Fund Association member website (US)
897:
60:-recognized types of investment companies along with
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780:
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669:"Investor Sentiment and the Closed-End Fund Puzzle"
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474:
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530:Bodie, Zvi; Kane, Alan; Marcus, Alan J. (2010).
1051:Qualifying investor alternative investment fund
173:when the fund sells the underlying investments;
937:
801:"Play the Closed-End Fund Game with the Pros"
702:"Play the Closed-End Fund Game with the Pros"
8:
1011:Labour-sponsored venture capital corporation
906:– The US association of investment companies
653:: CS1 maint: multiple names: authors list (
380:"An Introduction to Closed-End Mutual Funds"
525:
523:
521:
519:
442:. New York: McGraw Hill. pp. 340–341.
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140:Comparison to exchange-traded funds (ETFs)
490:U.S. Securities and Exchange Commission
371:
894:– The Closed-End Fund Association (US)
836:
825:
737:
726:
646:
626:
624:
16:Professionally managed investment fund
422:"Open-end vs Closed-end Mutual Funds"
7:
759:. New York: McGraw-Hill. p. 8.
757:Herzfeld's Guide to Closed-End Funds
799:Forsyth, Randall (April 14, 2021).
513:, §5.02 (Matthew Bender, 2014 ed.).
466:, §9.05 (Matthew Bender, 2014 ed.).
631:Lee, Charles M.; Shliefer, Andre;
511:Regulation of Investment Companies
464:Regulation of Investment Companies
344:Frederic Palomino. September 1996.
300:closed-ended collective investment
265:General American Investors Company
241:Scottish Mortgage Investment Trust
14:
1322:
1315:
1314:
338:and Richard Stanton. April 2007.
359:Greggory A. Brauer. March 1988.
342:Noise Trading in Small Markets.
1148:Socially responsible investing
1078:Split capital investment trust
916:Australian Stock Exchange site
187:However, financial economists
47:Investment Company Act of 1940
1:
1036:Open-ended investment company
609:. The Economist Newspaper Ltd
482:"Closed-End Fund Information"
288:Collective investment schemes
250:Tri-Continental Corporation (
1294:Returns-based style analysis
1057:Real estate investment trust
904:Investment Company Institute
755:Herzfeld, Thomas J. (1993).
233:Witan Investment Trust plc (
1229:Efficient-market hypothesis
605:Buttonwood (May 25, 2024).
580:Investopedia (2015-05-28).
314:Listed investment companies
282:Closed-End Fund Association
205:Herzfeld Closed-End Average
1368:
1068:Short-term investment fund
290:: for generic information.
18:
1312:
1016:Listed investment company
985:Fonds commun de placement
532:Essentials of Investments
408:"Closed-end Mutual Funds"
132:publish adjusted ratios.
1352:Exchange-traded products
1224:Arbitrage pricing theory
19:Not to be confused with
1299:Traditional investments
1284:Commodity pool operator
1258:Noisy market hypothesis
1253:Modern portfolio theory
1103:Unitised insurance fund
1031:Open-ended fund company
973:Common contractual fund
509:Lemke, Lins and Smith,
462:Lemke, Lins and Smith,
80:Distinguishing features
1279:Alternative investment
1193:Institutional investor
835:Cite journal requires
736:Cite journal requires
637:The Journal of Finance
438:Thau, Annette (2001).
327:The Journal of Finance
257:Gabelli Equity Trust (
157:Discounts and premiums
66:unit investment trusts
56:and form one of three
43:Securities Act of 1933
32:closed-end mutual fund
1093:Unit investment trust
953:Investment management
822:"Lee et al p. 78-79".
325:Relevant articles in
224:Adams Express Company
146:exchange-traded funds
1083:Tax transparent fund
979:Exchange-traded fund
803:. Barron's/Dow Jones
690:accessed on 31/10/11
54:closed-end companies
1138:Manager of managers
1046:Private-equity fund
700:Forsythe, Randall.
1248:Martingale pricing
1158:Thematic investing
1123:passive management
723:"Lee et al p. 78".
30:, also known as a
1334:
1333:
1112:Investment styles
918:– Australian LICs
633:Thaler, Richard H
541:978-0-07-338240-1
1359:
1347:Investment funds
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1167:growth investing
1133:Impact investing
1001:Investment trust
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786:Herzfeld p. 8-17
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336:Jonathan B. Berk
294:Investment trust
191:, Alex Kane and
118:rights offerings
114:commercial paper
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1234:Fixed income
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1165: /
1121: /
1041:Pension fund
860:
849:
828:cite journal
817:
805:. Retrieved
794:
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756:
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729:cite journal
718:
706:. Retrieved
695:
683:. Retrieved
676:the original
663:
649:cite journal
643:(1): 75–109.
640:
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611:. Retrieved
600:
589:. Retrieved
586:Investopedia
585:
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494:. Retrieved
492:. 2013-01-16
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310:information.
304:Mutual funds
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62:mutual funds
53:
51:
40:
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27:
25:
1263:Yield curve
1176:Terminology
1128:Hedge Funds
1021:Mutual fund
961:Investment
353:March 1993.
21:closed fund
1341:Categories
1098:Unit trust
1006:Hedge fund
996:Index fund
965:structures
704:. Barron's
685:2010-12-01
591:2016-12-10
496:2015-12-16
366:References
126:volatility
1242:Convexity
318:Australia
189:Zvi Bodie
162:include:
150:arbitrage
36:leverage.
1320:Category
1238:Duration
276:See also
215:Examples
209:Barron's
106:leverage
45:and the
1053:(QIAIF)
486:SEC.gov
74:Florida
1217:Theory
1119:Active
1059:(REIT)
763:
613:31 May
538:
446:
316:: for
306:: for
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