Which statement correctly describes Closed End Funds?

Which statement correctly describes Closed End Funds?

• A. They redeem shares at scheduled intervals
• B. They generally do not redeem shares, but may at certain intervals; investors sell shares on the market; they tend to be actively managed and therefore more expensive
• C. They are always passively managed
• D. They are not traded on exchanges

Answer: (B)

Closed-end funds raise a fixed amount of capital and issue a fixed number of shares that trade on a securities exchange. Because of that structure, they generally do not redeem shares at net asset value on a routine basis. Instead, investors buy and sell shares in the market, with prices that reflect supply and demand and can trade at a premium or discount to the fund’s NAV. Many closed-end funds are actively managed, which often leads to higher expense ratios compared to passive funds. Some funds may offer periodic redemption options or tender offers, but such redemptions are not the norm. This combination—no regular redemption by the fund, market trading of shares, potential premiums/discounts to NAV, and often active management with higher costs—best describes closed-end funds.

Closed-end funds raise a fixed amount of capital and issue a fixed number of shares that trade on a securities exchange. Because of that structure, they generally do not redeem shares at net asset value on a routine basis. Instead, investors buy and sell shares in the market, with prices that reflect supply and demand and can trade at a premium or discount to the fund’s NAV. Many closed-end funds are actively managed, which often leads to higher expense ratios compared to passive funds. Some funds may offer periodic redemption options or tender offers, but such redemptions are not the norm. This combination—no regular redemption by the fund, market trading of shares, potential premiums/discounts to NAV, and often active management with higher costs—best describes closed-end funds.