What is Close-Ended Fund?
A close-ended mutual fund issues a fixed number of units during its NFO (New Fund Offer) period and has a defined maturity date. After the NFO, new investors can only buy units on the stock exchange if listed, and the fund does not accept new subscriptions or redemptions until maturity.
Formula
How to Interpret
Close-ended funds lock in your capital for a fixed period (typically 3–5 years). This gives the fund manager stability to invest without worrying about redemption pressure. However, if you need to exit early, you must sell on the exchange, often at a discount to NAV. In US markets these are called Closed-End Funds (CEFs) and frequently trade at 5–15% discounts to NAV. In international markets like India, close-ended funds have historically not outperformed their open-ended peers either.
Typical Ranges
Suitable only for investors who can commit capital for the full lock-in period and do not need interim liquidity.