A closed-end fund is a type of investment vehicle that raises capital by issuing a fixed number of shares at its inception and then invests that capital in financial assets such as stocks and bonds. After the initial public offering (IPO), the shares of a closed-end fund can be bought and sold on a public stock exchange, but no new shares can be created. Closed-end funds are usually actively managed and typically concentrate on a single industry, sector, or region.

Some distinguishing features of closed-end funds include:

• Shares: Closed-end fund shares are traded on stock exchanges and can be purchased and sold through brokers at any time during market hours. In contrast, an open-end fund can usually be traded only by transacting directly with the investment company that manages the fund, at a time of day specified by the investment company, and the dealing price will usually not be known in advance.

• Pricing: A closed-end fund usually trades at a premium or discount to the market value of its assets, known as net asset value (NAV). In contrast, the price of an open-end fund cannot fall below NAV because the investment company that manages the fund will buy back shares at NAV.

• Capital: Unlike open-end mutual funds, a closed-end fund manager does not face reinvestment risk from daily share issuance. A closed-end fund manager does not have to hold excess cash to meet redemptions. Because there is no need to raise cash quickly to meet unexpected redemptions, the capital is considered to be more stable than in open-end funds.

Closed-end funds are registered with the Securities and Exchange Commission (SEC) and subject to SEC regulation. The investment portfolios of closed-end funds are typically managed by separate entities known as investment advisers that are also registered with the SEC. Closed-end funds typically pay distributions on a monthly or quarterly basis, which can include income generated by the fund, interest income, dividends, or capital gains, or a return of principal/capital.