Closed-end funds are a major category of funds. Unlike open-end funds, closed-end funds have a strict closing period and cannot be redeemed before the closing period expires.

In the process of investing in closed-end funds, we found that closed-end funds have a discount phenomenon, that is, the market price is low.

So regardless of the mystery of the discount of closed-end funds, let’s take a brief look at the reasons for the discount phenomenon today.

What is the discount phenomenon of closed-end funds?

Closed-end funds have market prices and net values. When the market price is lower than the net value, it is called a discount.

The discount rate is an indicator that measures the discount of closed-end funds.

Generally speaking, discount rate = (net value - market price) / net value * 100%.

So, why does the discount phenomenon of closed-end funds occur?

In fact, the discount of closed-end funds is a common phenomenon in the international market, and there are countless studies on the discount of closed-end funds.

The main points of agreement are the following two aspects.

1. Trader sentiment, that is, the impact of investors’ investment attitudes.

Irrational people's expectations of future expected returns are easily affected by unpredictable changes; when they are pessimistic about expected returns, the supply and demand relationship changes, and the fund's trading price will fall, resulting in a large discount relative to the fund's net asset value.

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2. The risk of the investment portfolio held by closed-end funds is greater than that of open-end funds. Under certain conditions or circumstances, closed-end funds will generate impact costs in the process of asset changes, causing closed-end funds to be discounted.

Of course, in addition to the above main reasons, there may be other influencing factors, and these mysteries need to be understood slowly.

That’s it for the above content about the mystery of the discount of closed-end funds. I hope it will be helpful to everyone.

Warm reminder, financial management is risky, so investment needs to be cautious.