What is the closed-end fund?

A closed-end fund is a type of professionally managed fund having a defined portfolio (the combination of several scripts) based on a fixed number of shares issued in an initial public offering, listed on a stock exchange at secondary market trading purposes and are not redeemable with funds.


These are professionally managed funds, like a mutual funds. They have a dedicated relationship manager who looks after the portfolio and continues to trade i.e. buy/sell and hold scripts based on market conditions.

Like exchange-traded funds, these trade like stocks when their prices change during the trading session. However, these are very similar to exchange-traded funds, but they also have a huge difference.

After the IPO, with closed-end funds, the company can no longer issue shares. In addition, these funds cannot be redeemed by the redemption of shares. The only thing possible is to buy and sell these shares on the secondary market by investors.

How does it work?

They have several characteristics that make them popular in their category. They are similar to exchange-traded funds or mutual funds. These funds are managed by Investment Advisors, managed expert managers who initiate trading on a predetermined portfolio.

They charge commissions, which in turn produce income for investors in the form of capital gains. This is classified as an investment company available to the public to invest in.

The portfolio and portfolio managers must be registered with the Securities and Exchange Commission and comply with stock exchange guidelines/requirements.
According to the rules of the stock exchange commission, it can only be launched through an initial public offering open for a short period (210 days) as permitted by the rules of the stock exchange, as permitted.

Subsequently, these funds are treated as shares and are traded on the stock exchange as scrips. The fund price may be higher or lower than the IPO price depending on market supply and demand.

Closed Ended Fund Example

HDFC Equity Opportunities Fund – This is a large cap closed-end fund maturing July 2020, with a corpus of 1118 crore trading at 9.85 to 10.65 NAV with a discount of 8 .1%.

ICICI Prudential Value Fund – This is a valuable fund with assets of 1779 crores maturing in June 2021, trading at 9.2 from 10.38 NAV at a discount of 12.8%.

shares of ICICI Prudential Bharat Consumption Fund – This is a Series II fund with assets of 267 crore trading at 8.79 from 9.91 NAV with a discount of 12.9%.

How to invest in the closed fund?

Investments in closed-end funds can be made directly on the markets or through agents. This can also be done by contacting mutual fund distributors and asking them about the necessary paperwork, forms and questions to fill out. Before investing, an investor should ensure that they are investing through a distributor registered with the association of mutual funds, which deals with such funds having an ARN assigned by the association.

If the investment is to be made through a direct plan, a financial adviser is required, available through distributors. However, there is no need to pay a distribution fee for advisory services. The Distributor must disclose all fees, commissions and charges payable to it for all available Plans.

Investors can invest directly by visiting closed-end funds, mutual fund branches or through online websites.Physical forms can be sent to agents and distributors who provide these services.
Before investing, the investor should check the background of the funds and schemes and refer to the product labeling.

Label must contain -


These funds are stable with their capital base. At the time of the ONF, these funds brought together a broad base of assets. The fund manager bears the minimal risk of redemption of the assets and the occurrence of a change in the asset. These funds may be invested in other financial assets, stocks or debt securities.

Allows investors to invest in a variety of new and creative strategies.

There is no risk of massive inflows and outflows in closed funds. Investors’ money is blocked until maturity.As a result, the fund manager is able to make rational decisions.

Investors are free to sell the fund and liquidate their position according to the rules set by the fund house. These units can be sold on the market during trading hours.

An impressive portfolio for better returns.

Investors can trade units of their closed-end fund. The prices may differ from the net asset value of the funds.


Subscriber has to pay huge commissions for buying or selling units,
Subscription Option- Can only be purchased through brokers or intermediaries.

The portfolio of these funds is subject to rapid changes that are generally unpredictable.

These funds offer less cash than open-end funds.
Pricing – Discount factors can lower the price of closed-end funds.


This can be described as a type of professionally managed fund containing a fixed portion of scripts (a defined portfolio) offered on IPO and cannot be redeemed by the funds but cannot be traded in secondary markets.

These funds offer many advantages such as stability, flexibility, non-redeemable fixed funds, single wallet and stock options, but also have disadvantages such as freezing of funds that cannot be withdrawn from funds (you can exit by trading on the secondary market), the cost of subscription is more due to the need to pay specific fees to the portfolio managers, the unpredictability of the markets, the limitations of subscription options.

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