Closed-end funds

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Also known as a closed-end company, a closed-end fund is one of three types of an investment company. The other two kinds are unit investment trusts (UITs) and mutual funds.

Closed-end funds do not continuiously offer shares for sale, instead selling a fixed number of shares in an initial public offering (IPO), after which time the shares trade on a secondary market. The shares associated with closed-end funds generally are not redeemable. The price of closed-end fund shares that trade on a secondary market is determined by the market and may differ from the shares’ net asset value (NAV).

The investment portfolios of closed-end funds generally are managed by separate entities known as investment advisers. Investment advistors must be registered with the Securities and Exchange Commission.