Publicly Traded Closed-End Funds

A closed-end fund is one of three main types of investment companies that the Securities and Exchange Commission regulates. The two other main types of investment companies are open-end funds (including mutual funds and most exchange-traded funds or ETFs) and unit investment trusts (UITs).

There are several types of closed-end funds with unique characteristics, such as interval funds or business development companies (BDCs). This page discusses closed-end funds whose shares can be bought and sold on national securities exchanges, or “publicly traded” closed-end funds.

In many ways, publicly traded closed-end funds are like other investment companies:

They pool money from investors and invest those funds in a variety of stocks, bonds and/or other assets;
They are registered with the SEC and subject to SEC regulation; and
Their assets are professionally managed by investment advisers who are also registered with the SEC.

Publicly traded closed-end funds are also different from other investment companies in important ways:

Unlike traditional mutual funds (or “open-end funds”), they are not required to buy back shares from shareholders.
Their managers may have more flexibility to invest in less liquid assets – such as private companies, derivatives, or certain debt instruments.
They sell their shares in a public offering. After that, their shares trade on national securities exchanges at market prices. The market price may be greater or less than the market value of the fund’s underlying investments.
They may follow a managed distribution policy. A managed distribution policy means that the funds pay distributions to their shareholders on a set schedule. This helps provide a predictable, but not guaranteed, cash flow to shareholders on a monthly or quarterly basis.

Before you invest in a publicly traded closed-end fund:

Carefully read all of the fund’s available information, including its prospectus and most recent shareholder report. You can get this information by looking at the fund’s filings on the SEC’s EDGAR database, from your investment professional, or directly from the fund.
Understand the fees and expenses you will pay for the fund, and compare them to other investment options.
Be sure that the fund’s investment strategy is consistent with your goals.
Ask questions about the fund, including whether its shares are trading at a discount or premium, if it uses leverage or debt, to what extent it holds illiquid investments, whether it follows a managed distribution policy, and what you will pay in fees and expenses.

Additional Information:

Investor Bulletin: Publicly Traded Closed-End Funds

Investor Bulletin: Interval Funds

Publicly Traded Business Development Companies (BDCs): Investor Bulletin

Non-Publicly Traded Business Development Companies (BDCs): Investor Bulletin