What is the difference between closed-end fund and open-end fund?

Difference between closed-end fund and open-end fund:

1, the period is different

Closed-end fund generally has a fixed duration; while the open-end fund is generally no specific duration. The Securities Investment Fund Law provides that closed-end fund contracts must provide for a closed-end fund period, and closed-end funds can be extended or converted to open-end through certain statutory procedures upon expiration of the closed-end fund period.

2, share restrictions are different

Closed-end fund share is fixed, in the closed period can not be increased or decreased without the approval of the statutory procedures, open-end fund size is not fixed, investors can apply for subscription or redemption at any time, the fund share will be increased or decreased.

3, different trading venues

Closed-end fund shares are fixed, after the completion of the collection, the fund shares are listed on the stock exchange. Investors buying and selling closed-end fund shares can only entrust securities companies to buy and sell at the market price on the stock exchange, and the transaction is completed between investors. Open-end fund shares are not fixed, and investors can submit applications for subscription and redemption to the fund manager or its sales agent in accordance with the time and place determined by the fund manager, and the transaction is completed between the investor and the fund manager.

4, the price formation method is different

Closed-end fund trading price is mainly affected by the secondary market supply and demand. When the demand is strong, the closed-end fund secondary market trading price will be more than the net value of the fund share premium trading phenomenon; on the contrary, when the demand is low, the trading price will be lower than the net value of the fund share discount trading phenomenon. The purchase and sale prices of open-end funds are based on the net value of fund shares and are not affected by market supply and demand.

5, incentives and constraints and investment strategies are different

Closed-end fund shares are fixed, even if the fund performs well, its ability to expand is also subject to greater restrictions. If the performance is not satisfactory, because investors can not redeem the investment, the fund manager usually does not face direct pressure in the operation and liquidity management. In contrast, if an open-ended fund performs well, it usually attracts new investors and the fund manager's management fee income increases.

Expanded Information

Open-ended funds and closed-ended funds*** together form the two basic ways of operating funds.

Open-ended funds, are investment funds where the size of the fund is not fixed but can be issued new shares or redeemed by investors at any time according to market supply and demand. Closed-end fund, which is relative to open-end fund, is an investment fund whose fund size has been determined before issuance and is fixed and unchanged after the issuance has been completed and for a specified period of time.

Open-ended funds are not listed for trading, and they can be sold directly by fund companies; they can also be sold on behalf of fund companies by their agents, such as commercial banks or securities offices; they can also be subscribed and redeemed online through the fund company's Web site, and the fees can be preferential, and their sizes are not fixed, and the fund units can be sold to investors at any time, and they can be purchased at the request of the investor's mode of operation.

Closed-end funds have a fixed duration, during which the size of the fund is fixed, and are generally listed and traded on stock exchanges, with investors buying and selling units through the secondary market. Closed-end funds are closed for a period of time and are not allowed to accept new entries and withdrawals of shares until a new round of openings, which can determine how much you put up or how much you put back in, and newcomers can also enter the shares at this time. Usually the open period is 1 week and the closed period is 1 year.

Closed-end funds (close-end funds) refers to the fund promoter in the establishment of the fund, limited to the total amount of units issued, raise the total amount and the necessary approval or record, the fund is declared established and closed, in a certain period of time no longer accept new investments. The circulation of fund units is listed on the stock exchange, and investors who buy and sell fund units must do so through securities brokers in the secondary market.

Fund size

Fund size variability is different. Closed-end funds have a specified duration (in China, not less than 5 years), during which the issued shares cannot be redeemed. Although such funds can be expanded under special circumstances, the expansion should be subject to strict statutory conditions. Therefore, under normal circumstances, the size of the fund is fixed.

Buying and Selling Methods

The buying and selling of fund shares is different. When a closed-end fund is launched, investors can subscribe to the fund management company or sales organization; when the closed-end fund is listed and traded, investors can commission a broker to buy and sell the shares at market price on the stock exchange. When investors invest in an open-end fund, they can subscribe or redeem from the fund management company or sales organization at any time.

Buying and selling prices

The buying and selling prices of fund shares are formed in different ways. Closed-end funds are listed on the stock exchange, and their bid and ask prices are greatly influenced by market supply and demand. When market supply is less than demand, the price of fund shares may be higher than the net asset value of each fund share, which will increase the fund assets owned by the investor; when the market supply is greater than demand, the fund price may be lower than the net asset value of each fund share.

Investment Strategies

Funds have different investment strategies. Since closed-end funds cannot be redeemed at any time, all the money raised can be used for investment, which allows the fund management company to develop a long-term investment strategy and achieve long-term business performance. Open-ended funds, on the other hand, must retain a portion of cash for redemption by investors at any time and cannot be fully utilized for long-term investment. They are generally invested in assets with high liquidity.

Different conditions

Open-ended funds are more flexible and easier to scale up and down, so they are suitable for financial markets with a higher degree of openness and a larger scale; closed-ended funds, on the contrary, are suitable for financial markets with an imperfect financial system, a lower degree of openness and a smaller scale.

Baidu Encyclopedia - Closed-end Funds

Baidu Encyclopedia - Open-end Funds