An Overlooked Opportunity

Long overlooked and poorly understood by most investment managers KIM has extensive experience investing in closed-end funds.

Learn more about this little understood but important investment vehicle:

What is a closed-end fund?

A closed-end fund is a type of fund that has a fixed number of shares. The funds are investment companies that offer their shares through initial public offerings and typically trade, like stocks, on major exchanges. They might aim to produce income, capital gains or some combination of the two. Unlike the more common open-end mutual funds, closed-end funds do not issue or redeem shares continuously.

What are the advantages of closed-end funds?

Because closed-end funds do not issue or redeem shares after their initial public offering, they often trade at discounts to their net asset value (NAV). This can be like buying a dollar for 80 cents.

What does net asset value mean?

NAV refers to the net asset value of a share in a closed-end fund. The formula for calculating NAV is total assets minus total liabilities divided by shares outstanding. This reveals the current value of a share in the closed-end fund.

Why do closed end funds trade at a discount?

Like stocks, closed-end funds are traded on exchanges where price is determined by supply and demand. When demand exceeds supply, shares in a closed-end fund might trade at a premium to (more than) their net asset value. However, with closed-end funds, supply often exceeds demand. Therefore, shares typically trade at discounts to (less than) their NAV.

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