Open-end fund

Open-end fund

An open-end(ed) fund is a collective investment scheme which can issue and redeem shares at any time. An investor will generally purchase shares in the fund directly from the fund itself rather than from the existing shareholders. It contrasts with a closed-end fund, which typically issues all the shares it will issue at the outset, with such shares usually being tradeable between investors thereafter.

Open-ended funds are available in most developed countries, though terminology and operating rules vary. U.S. mutual funds, UK unit trusts and OEICs, European SICAVs, hedge funds and exchange-traded funds are all examples of open-ended funds.

The price at which shares in an open-ended fund are issued or can be redeemed will vary in proportion to the net asset value of the fund, and therefore directly reflects the fund's performance.

Contents

Fees

There may be a percentage charge levied on the purchase of shares or units. Some of these fees are called an initial charge (UK) or 'front-end load' (US). Some fees are charged by a fund on the sale of these units, called a 'close-end load,' that may be waived after several years of owning the fund. Some of the fees cover the cost or distributing the fund by paying commission to the adviser or broker that arranged the purchase. These fees are commonly referred to as 12b-1 fees in U.S. Not all fund have initial charges; if there are no such charges levied, the fund is "no-load" (US).

These charges may represent profit for the fund manager or go back into the fund.

Active management

Most open-end funds are actively managed, meaning that a portfolio manager picks the securities to buy, although index funds are now growing in popularity. Index funds are open-end funds that attempt to replicate an index, such as the S&P 500, and therefore do not allow the manager to actively choose securities to buy.

Net asset value

The price per share, or NAV (net asset value), is calculated by dividing the fund's assets minus liabilities by the number of shares outstanding. This is usually calculated at the end of every trading day.

Hedge funds

Hedge funds are typically open-ended and actively managed. However, their NAV is typically calculated monthly.

Examples

U.S. mutual funds:

See also


Wikimedia Foundation. 2010.

Игры ⚽ Нужна курсовая?

Look at other dictionaries:

  • open-end fund — Used in the context of general equities. mutual fund that continually creates new shares on demand. mutual fund shareholders buy the funds at net asset value and may redeem ( redemption) them at any time at the prevailing market prices.… …   Financial and business terms

  • Open-end fund — Also called a mutual fund, an investment company that stands ready to sell new shares to the public and to redeem its outstanding shares on demand at a price equal to an appropriate share of the value of its portfolio, which is computed daily at… …   Financial and business terms

  • Open-End Fund — A type of mutual fund that does not have restrictions on the amount of shares the fund will issue. If demand is high enough, the fund will continue to issue shares no matter how many investors there are. Open end funds also buy back shares when… …   Investment dictionary

  • open-end fund — noun a regulated investment company with a pool of assets that regularly sells and redeems its shares • Syn: ↑mutual fund, ↑mutual fund company, ↑open end investment company • Hypernyms: ↑investment company, ↑investment trust, ↑investment firm, ↑ …   Useful english dictionary

  • open-end fund — noun A collective investment scheme which can issue and redeem shares at any time. Syn: open ended fund Ant: closed end fund …   Wiktionary

  • open-end — ˈopen end adjective [only before a noun] an open end fund or trust does not have a fixed number of shares: • an open end mutual fund * * * open end UK US adjective ► (also open ended) FINANCE used to describe an investment fund in which shares… …   Financial and business terms

  • Open-End Management Company — A company that distributes and redeems securities it issues. The most common open end management companies are mutual fund companies which sell and redeem shares at the net asset value per share. This is just a fancy legal name for a mutual fund …   Investment dictionary

  • open-end investment company — noun a regulated investment company with a pool of assets that regularly sells and redeems its shares • Syn: ↑mutual fund, ↑mutual fund company, ↑open end fund • Hypernyms: ↑investment company, ↑investment trust, ↑investment firm, ↑ …   Useful english dictionary

  • Closed-end fund — A closed end fund (or closed ended fund) is a collective investment scheme with a limited number of shares. It is called a closed end fund (CEF) because new shares are rarely issued once the fund has launched, and because shares are not normally… …   Wikipedia

  • Closed-End Fund — A closed end fund is a publicly traded investment company that raises a fixed amount of capital through an initial public offering (IPO). The fund is then structured, listed and traded like a stock on a stock exchange. Also known as a closed end… …   Investment dictionary

Share the article and excerpts

Direct link
Do a right-click on the link above
and select “Copy Link”