Glossary

Closed-end fund

A fund that issues a fixed number of shares

A closed-end fund, issued by an investment firm, has a predetermined fixed number of shares and a limited investment volume. As soon as the planned volume is reached, the fund is closed and shares are no longer issued.

In some countries, such as the USA, the shares of such funds can be traded on an exchange. In Germany, however, only the investment company can buy back the shares. However, investors do not have a right to sell their shares, i.e. the investment company is not obliged to buy them back. If investors want to sell before the shares mature, they often must pay a high premium.

The resale value of a share during the fund's maturity is not based on the share's representative value of the fund's current total assets. Instead, it underlies the market value determined by supply and demand. Therefore, the shares are often traded at a high premium or discount relative to their actual inventory value. Closed investment funds are not subject to the investor-protection regulations outlined by the German Capital Investment Companies Act (KAGG).

Antonym: open fund

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