What is a closed-end fund?
Generally speaking, closed-end fund is an operation that can no longer be traded after issuance, and its share is fixed, which can neither be increased nor decreased. The total issuance amount and the issuance period have been determined at the time of establishment. Funds that cannot be traded within the specified period after issuance cannot be purchased by investors after the fund raising is completed, and investors cannot redeem them during the investment period. Closed-end funds have the characteristics of long investment cycle, fixed issuance quantity and duration.
What's the difference between closed-end funds and open-end funds?
The differences between closed-end funds and open-end funds are mainly manifested in different investment periods, different investment share restrictions, different trading places, different price formation methods, different incentive and restraint mechanisms and investment strategies.
Investment duration: Under normal circumstances, closed-end funds will have a fixed duration, while open-end funds generally have no fixed duration.
Investment share restriction: in a fixed duration, the share of closed-end funds is fixed, while open-end funds can be purchased and redeemed at any time.
Trading places: closed-end funds are traded on the floor and can only be traded through the stock exchange, while open-end funds are traded over the counter and can be traded through third-party platform software.
In terms of price formation: the transaction price of closed-end funds is mainly affected by the relationship between supply and demand in the secondary market. The transaction price of open-end funds is based on the net value of fund shares and is not affected by the relationship between market supply and demand.