Open-end and closed-end funds are investment companies that allow investors to pool their capital to invest in a wide range of securities. They provide investors access to professionally managed portfolios to help meet their investment objectives.
A mutual fund is an investment company that invests in a pool of securities, such as stocks and bonds. Also known as an open-end investment company, a mutual fund continuously offers and redeems shares on a daily basis at the fund’s net asset value.
Exchange-traded funds (ETFs) are investment companies that hold stocks, bonds, commodities or other securities. Passively managed ETFs track an index, such as the S&P 500 or Dow Jones Industrial Average, or a basket of similar assets such as bonds, commodities or futures contracts. Actively managed ETFs pursue active management strategies. Unlike mutual funds, ETFs can be bought and sold throughout the day.
A closed-end fund is also an investment company that pools the assets of its shareholders to invest in a wide range of securities. Unlike a mutual fund, however, a traditional closed-end fund issues a predetermined number of shares, which are typically issued through an initial public offering and listed on a national securities exchange. In contrast, an unlisted closed-end fund issues shares over a longer period, often several years, and provides limited liquidity to investors.
A BDC is a type of closed-end fund that facilitates the flow of capital from individual investors to U.S. middle market companies. They are required to invest at least 70% of their assets in private U.S. companies or U.S. public companies with market values of less than $250 million.
An interval fund is a type of closed-end fund that periodically offers to buy back a defined portion of its shares from shareholders. Unlike traditional closed-end funds, interval fund shares typically do not trade on the secondary market. Instead, shares are repurchased every three, six or twelve months at a price based on net asset value.
Unit investment trusts
Unit investment trusts (UITs) share characteristics with both mutual funds and closed-end funds. Like mutual funds, UITs issue redeemable shares. Like closed-end funds, UITs issue only a fixed number of shares. In contrast to both, UITs have a set termination date.