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The Curious Bag
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Closed-end funds are investment companies which are regulated under the Investment Company Act of 1940 (as are open-ended mutual funds), the Securities Act of 1933 and the Securities Exchange Act of 1934. They have few similarities to open-ended mutual funds.
IPO
Unlike open-ended mutual funds which can continuously issue shares to new investors, closed-end funds issue shares once in an initial public offering (IPO).
Active Management
Closed-end funds utilize a portfolio manager to invest and manage assets raised in its IPO. He is responsible for all investment selection.
Pricing
Shares of closed-end funds trade on an exchange just as stocks do, with a bid and ask price, and are readily transacted during market hours.
Investment Parameters
Unlike open-ended mutual funds, closed-end funds can invest in less liquid assets such as real estate, precious metals bullion and partnerships, among other assets.
Value Premiums/Discounts
Because they raise only a fixed amount of capital with the IPO, their outstanding shares can be worth more or less than the underlying assets, depending on supply and demand for their shares.
Source:
SEC: Closed End Fund Information
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