Closed ended  

Guide to closed-ended vs open-ended funds

  • Describe the main differences between closed-ended and open ended investment vehicles
  • Explain the issues over liquidity
  • Describe how and when to access these products
CPD
Approx.60min
Guide to closed-ended vs open-ended funds

Introduction

The debate over closed-ended and open-ended funds has become much more of a live issue, as several funds have had to be gated, because of liquidity issues. 

In some instances it was because the fund manager had invested heavily in illiquid stocks, such as Neil Woodford, or a particular asset - namely property - was having a hard time and investors wanted out.

Many in the closed-ended sector have argued that these problems would not have happened in an in vestment trust, as investors can by and sell shares in the trust on a daily basis.

But closed-ended itself is not without drawbacks itself - the value of the shares of the investment trust vary depending as much on market sentiment as on the value of the underlying assets.

In this guide, we attempt to set out some of the main issues relating to closed-ended and open-ended and draw out some of the arguments both for and against.

This guide is worth an indicative 60 minutes.

In this guide

CPD
Approx.60min

Please answer the six multiple choice questions below in order to bank your CPD. Multiple attempts are available until all questions are correctly answered.

  1. According to the first feature, how is the value of an investment trust determined?

  2. According to the first feature, what does gearing mean and what does it apply to?

  3. Why is liquidity a bigger issue for open-ended companies, according to feature two?

  4. Open-ended funds typically pay out income as dividends, according to the third feature, true or false?

  5. What is the best way to access investment trusts in the current market, according to the third feature?

  6. Investment companies stay on an even keel at most times, according to the fourth feature, true or false?

Nearly There…

You have successfully answered all the questions correctly, well done!

You should now know…

  • Describe the main differences between closed-ended and open ended investment vehicles
  • Explain the issues over liquidity
  • Describe how and when to access these products

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