What is a Closed Fund?

A closed end fund is an investment fund that offers a finite or limited number of shares. The company offering the fund issues an IPO to raise a fixed amount of money. Shares can be purchased on a secondary market from a current share holder or from a broker, similar to stock. A closed fund is a type of investment that functions more like equity (a stock) than a typical mutual fund would. There are a limited number of shares issued in a public offering and once they have been fully subscribed, they are traded on an exchange, much like a stock, where pricing fluctuates either above or below net asset value as a function of supply and demand of investors. The rules for closed-end fund management are broader than those of mutual funds. Fund managers can choose to invest in a higher percentage of illiquid assets.