Closed-End Funds: What They Are, Examples, Fee Structures, Analysis

For many investors, there’s no better way to amass a large sum of money than by investing in the stock market. And if you’re looking for an investment that can give you instant returns with minimum risk, closed-end funds are one of the best options available. But before making any decision on which type of closed-end fund to invest in, it is important that you first understand what they are and how they work.

This article will explain everything you need to know about closed-end funds including what they are, how much they cost, and why people choose them as their preferred investment vehicle.

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Introduction to Closed-end Funds

Closed-end funds are basically mutual funds that have been structured as a company. This means that they have a board of directors and are subject to the same regulation as any other public company.

The big difference between closed-end funds and regular mutual funds is that closed-end funds issue a fixed number of shares during their initial public offering (IPO). After that, no new shares will be created. This is what sets them apart from an open-end fund which issues new shares every time a new investor invests money into the fund.

Closed-end funds can be traded on stock exchanges just like any other public company. However, purchasing them isn’t as simple as choosing which ones you want and buying them through your broker. Since the number of shares is fixed, you’ll need to find a buyer who is willing to sell you their shares at the current market price.

Examples of Closed-End Funds

There are a variety of different closed-end funds to choose from and each one has its own unique investment strategy. For example, you could invest in a sector fund that focuses on a particular industry, or you could choose a global equity fund that gives you exposure to companies from all over the world.

Eaton Vance Tax-Managed Global Diversified Equity Income Fund (EXG) would be a good example of a global equity fund. It’s one of the largest closed-end funds with a market cap of $3.2 billion as of September 2021. The primary goal is to offer current income and gains, with a secondary aim of capital appreciation.

Closed-End Funds Fees

The cost of investing in a closed-end fund varies depending on the type of fund you choose. For example, a sector fund may have lower fees than a global equity fund because there are fewer administrative costs involved with managing a smaller portfolio.

Most closed-end funds also charge an annual management fee which is generally between 1% and 2%. There may also be a fee for buying or selling shares, known as a commission. This fee will vary depending on the size of your order and what brokerage firm you use.

Closed-End Funds Analysis

When it comes to analyzing a closed-end fund, there are a few different things you need to look at.

The first is the NAV (net asset value) which is basically the market value of all the assets held by the fund minus any liabilities. You can find this information on the fund’s website or in their quarterly or annual reports.

The second thing you need to look at is the price-to-NAV ratio. This will tell you how much investors are willing to pay for each dollar of assets in the fund. A high price-to-NAV ratio means that investors think the fund is overvalued, while a low price-to-NAVratio indicates that you are getting a bargain.

The final thing is the distribution yield. This shows how much money you are being paid per year in distributions, which is the total amount of dividends, interest payments, or capital gains paid to shareholders during their most recent fiscal year.


Hopefully, now you have a better understanding of what closed-end funds are, how they work, and why people choose to invest in them. This is just one option for investing your money, but the fees are generally lower than those of open-end funds or individual stocks, plus you often have access to professional advisers who can help with making investment decisions.

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