What is a closed-end fund?

A closed-end fund, or CEF, is an investment company that is managed by an investment firm. Closed-end funds raise a certain amount of money through an initial public offering, or IPO, after which it can list shares on a stock exchange. Like mutual funds and ETFs, closed-end funds invest in a basket of securities.

How does the share price of a closed-end fund work?

The share price of a closed-end fund is based on the fund’s NAV but is also influenced by market supply and demand. Investors can use a brokerage service to trade shares of closed-end funds after their IPO from the secondary market, like the New York Stock Exchange.

Where do closed-end funds go?

Most closed-end funds are listed on the New York Stock Exchange ( NYSE) or the Nasdaq, where they are actively traded until the fund reaches its objective, liquidates itself and returns capital to its investors.