MONEY MATTERS

A closed-end fund is a registered investment company, just like the open-end mutual fund. But a closed-end fund issues a fixed number of shares that trade in the secondary market just like shares of any publicly traded company. As the closed-end fund have a fixed number of shares, the investors get an opportunity to gain exposure to most asset classes and generate additional return if the discount of the closed-end fund narrows.
Closed-end fund gives the investors the opportunity to trade at discount offers and beat the bench mark returns in yield alone. In the US, there are more than 620 closed-end funds that trade on equity exchanges, and they are typically managed by PIMCO, BlackRock and Nuveen. The file sync software helps business people to maintain their accounts software. Today many U.S. closed-end equity funds are trading at attractive discounts, some of which are wider than 15%.
If a share holder holds an equity based closed-end fund trading at a 15% discount and the market appreciates by 10% and the fund’s discount narrows to 10%, the shareholder would have an approximate 16.5% return. Here the shareholder’s alpha was 6.5%, and this is completely unique to closed-end funds.
If a shareholder owns a bond fund at a 15% discount, if the underlying bonds yield 5% and the fund is trading at a 15% discount, then it would yield 5.9%, here the additional 0.9% yield is considered alpha.
The closed-end fund has its own drawbacks, they are mainly owned by retail investors and the discounts or premium reflects the fear or over confidence of the retail investors. Sometimes the closed-end funds investor gets only the investment back, not net investment income.

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