Closed-end fund premium means that the market price of closed-end fund is higher than its net asset value. The transaction price of a closed-end fund is not necessarily equal to its net asset value. When listed on an exchange, the balance of market buying and selling forces determines the price of closed transactions. Therefore, the price of closed-end funds is changing at any time. When the market price of closed-end fund is greater than its net asset value, it is called premium phenomenon. On the contrary, it is a discount.

Why do closed-end funds discount?

(1) The market is changeable, and the buying and selling power determines the transaction price of closed-end funds, so there is uncertainty in closed-end funds. Investors will ask for price discount compensation to make up for the risks brought by uncertainty, and closed-end funds will discount.

(2) Closed-end funds are characterized by a closed period. The market is changeable, and the business ability of fund managers may be low. Many factors cause the fund manager to be unable to guarantee the profit and loss during the closed period. If the market falls before the maturity date, the fund assets will inevitably lose to a certain extent. This kind of risk is inevitable. There may be a lot of profits or losses during the closed-end period, and investors will demand to offset the risks, so the secondary market transactions of closed-end funds will inevitably be discounted.

(3) Compared with open-end funds, closed-end funds have poor liquidity, which makes closed-end funds have to be discounted to a certain extent.

(4) investor sentiment. If investors expect that the closed-end fund they invest in is more risky than the portfolio of the fund, they are unwilling to give such a high price for the net value of the fund.