The reasons for the discount of closed-end funds are: imperfect internal structure management and defects in internal governance structure; Fund holders cannot effectively intervene and restrain the behavior of fund managers. (1) The corporate governance structure is not perfect, the contractual fund has no board of directors, and the supervision responsibility falls on the trustee. (2) The governance system of fund companies is not perfect, and the moral hazard of fund managers is greatly increased. (3) Fund transactions are not completely transparent and rational. At present, the system risk in China accounts for a high proportion of the total risk. But there is no short-selling mechanism and no tools to avoid risks. Investment funds facing huge risks cannot effectively avoid risks. Fund managers operate passively. The fund contains a large degree of risk, so there is a huge discount. When the market falls, there are a lot of stocks in the fund that cannot be realized in a short time. American fund managers can hedge their risks by shorting stock index futures. At present, China lacks effective financial derivatives and cannot hedge, which increases the impact of systemic risks on funds. The types of fund investments are similar, and the operating concept of fund managers is immature and featureless. Many closed-end funds with similar portfolios are the phenomenon of disguised oversupply in the domestic securities market. Due to the lack of excellent securities investment targets, newly established funds have used this as an excuse to invest in other funds established earlier, which eventually led to a large discount transaction for all closed-end funds.

Imperfect external environment: the securities market is immature, and the China securities market is an emerging market. Although it has experienced a high-speed development stage, investors do not fully understand it and lack professional fund managers, so investors are prone to panic and withdraw their funds. The legal mechanism is not perfect, and the laws and regulations that have great influence on fund trading have not been promulgated, but are stipulated in the stock exchange. The information disclosure system is not timely, so it is difficult for investors to obtain timely and accurate information, which makes it difficult to make correct judgments. Although China's closed-end funds make quarterly, semi-annual and annual reports regularly, and fund managers publish the net asset value and net share value of closed-end funds at least once a week, there is still a problem of lagging information compared with foreign countries. Some funds practise fraud in order to whitewash their performance, but it is difficult for investors to form strong supervision over them. In this case, we can only seek price protection. Fund discount is also inevitable.