CHAPTER 11

 

Using Closed-End Funds

A closed-end fund issues a fixed number of shares, and when all the shares are sold, no more are issued. Unlike open-end funds, closed-end funds have fixed capital structures. Investors who want to invest in closed-end funds after all the shares are sold (for the first time) have to buy them from shareholders who are willing to sell them in the market. Shares of closed-end funds are listed on stock exchanges and over-the-counter markets, while shares of open-end mutual funds are bought from and sold to the investment company sponsoring the fund. As a result, share prices of closed-end funds are a function of not only their net asset values but also the supply of, and demand for, the stock in the market. The ...

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