Investors sometimes confuse mutual funds -- also known as “open-end” funds -- with “closed-end” funds. Like traditional mutual funds, closed-end funds are professionally managed investment companies that offer individual investors a variety of benefits. While there are a number of similarities between these two types of investment companies, there are also quite a few important differences. The below table provides a side-by-side comparison to help investors better understand the basic differences.
In addition to offering investors opportunities to generate return through portfolio performance, dividends and distributions, closed-end funds also enable investors to potentially buy and sell shares in the market at beneficial prices.
Click on any of the key features below to access additional details that make closed-end funds important investment options.
|Key Feature||Closed-End Funds||Open-End Mutual Funds|
|Pursuit of Investment Objective||Yes||Yes|
|Follows Defined Investment Strategy||Yes||Yes|
|Economies of Scale||Yes||Yes|
|Relatively Low Management Fees||Yes||Yes|
|Pass Through Taxation||Yes||Yes|
Fund Companies Continuously Offer to Sell and Redeem Shares
Share Price is Based only on Net Asset Value (NAV)
|Shares are Traded on Public Exchange||Yes||No|
Shares are Priced Throughout the Day
|Shares May Trade at Premium or Discount||Yes||No|
|Initial Public Offerings and Subsequent Rights Offerings of Fund Shares||Yes||No|
|Stable Asset Base||Yes||No|
|Minimum Investment Required||No||Yes|
|Use of Leverage||Yes||Limited|
|Investment in Illiquid Securities||Yes||Limited|