what is a closed end fund 
a closed end fund is a type of mutual fund that issues a fixed number of shares through one initial public offering ipo to raise capital for its initial investments its shares can then be bought and sold on a stock exchange but no new shares will be created and no new money will flow into the fund in contrast an open end fund such as most mutual funds and exchange traded funds etfs accepts a constant flow of new investment capital it issues new shares and buys back its own shares on demand many municipal bond funds and some global investment funds are closed end funds understanding closed end fundslike many mutual funds a closed end fund has a manager overseeing the portfolio and actively buying selling and holding assets similar to stocks and etfs its shares fluctuate in price throughout the trading day however the closed end fund s parent company will issue no additional shares and the fund itself won t buy back shares unless the closed end fund is an interval fund which is a type of closed end fund that can buy back shares closed end funds and open end mutual funds have many similarities both make distributions of income and capital gains to their shareholders both charge an annual expense ratio for their services moreover the companies that offer them must be registered with the securities and exchange commission sec 1closed end funds vs open end fundsclosed end funds differ from open end funds in fundamental ways as noted a closed end fund raises a prescribed amount of capital in a one time offering of a fixed number of shares once the shares are sold the offering is closed most mutual and exchange traded funds constantly accept new investor dollars issuing additional shares and redeeming or buying back shares from shareholders who wish to sell a closed end fund lists on a stock exchange where the shares trade like stocks throughout the trading day open end mutual funds price their shares only once a day at the end of the trading day basing the price on the net asset value of the portfolio the stock price of a closed end fund fluctuates according to the usual forces of supply and demand and the changing values of the fund s holdings because they trade exclusively in the secondary markets closed end funds require a brokerage account to buy and sell open end funds can usually be purchased directly through the fund s sponsoring investment company diversified portfolioprofessional managementtransparent pricingpotential for higher yieldssubject to volatilityless liquid than open end fundsavailable only through brokersmay get heavily discountedclosed end funds and net asset value nav its pricing is one of the unique characteristics of a closed end fund the nav of the fund is calculated regularly and based on the value of the assets in the fund however the price that it trades for on the exchange is market driven this means a closed end fund can trade at a premium or a discount to its nav a premium price means the price of a share is above the nav while a discount is the opposite below the nav there are several reasons for this a fund s market price may rise because it is focused on a sector currently popular with investors or because its manager is well regarded among investors or a history of underperformance or volatility may make investors wary of the fund driving down its share value closed end fund performanceclosed end funds do not repurchase their shares from investors that means they don t have to maintain a large cash reserve level leaving them with more money to invest they can also make heavy use of leverage borrowed money to boost their returns as a result closed end funds may be able to offer higher overall returns than their open fund mutual fund counterparts examples of closed end fundsthere are many different types of closed end funds these can include business development companies bdcs real estate funds commodity funds and bond funds the largest type of closed end fund as measured by assets under management is the municipal bond fund these large funds invest in the debt obligations of state and local governments and federal government agencies managers of these funds often seek broad diversification to minimize risk but may also rely on leverage to maximize returns managers also build closed end global international and emerging markets funds that mix stocks and fixed income instruments global funds combine u s and international securities international funds purchase only non u s securities emerging markets funds focus on fast growing and volatile foreign sectors and regions one of the largest closed end funds is the eaton vance tax managed global diversified equity income fund exg founded in 2007 it had total net assets of 2 7 billion as of dec 31 2023 2 the primary investment objective is to provide current income and gains with a secondary objective of capital appreciation 