Relationship between open-end funds and closed-end funds
A fund, broadly speaking, is a fund with a certain amount of money established for a certain purpose. It mainly includes trust investment funds, provident funds, insurance funds, retirement funds, funds of various foundations. From an accounting perspective, a fund is a narrow concept, meaning a fund with a specific purpose and use. When we refer to funds, we are mainly referring to securities investment funds. It is uncertain which was the earliest hedge fund. During the great bull market in the USA in the 1920s, there were countless such investment vehicles aimed specifically at the wealthy. The most famous of these was the Graham-Newman Partnership, founded by Benjamin Graham and Jerry Newman, and the bull market of the 1990s created a new class of wealthy people and hedge funds proliferated. Traders and investors became more interested in hedge funds because of their emphasis on a profit-sharing model and an "outperform" approach to investing. The next decade saw a proliferation of hedge fund investment strategies, including credit arbitrage, junk bonds, fixed income securities, quantitative investments, multi-strategy investments and more
Differences between open-end funds and closed-end funds
1, The variability of fund size is different. Closed-end funds have a definite duration, within which the units issued cannot be redeemed. Although such funds can be expanded under special circumstances, the expansion should be subject to strict statutory conditions. Therefore, under normal circumstances, the size of the fund is fixed.
2, The way in which units are bought and sold is different. When a closed-end fund is launched, investors can subscribe to the fund management company or sales institution; when the closed-end fund is listed and traded, investors can entrust a broker to buy and sell at market price on the stock exchange. In contrast, when investors invest in open-ended funds, they can subscribe or redeem from the fund management company or the selling institution at any time.
3, When the market supply is less than demand, the fund unit purchase and sale price may be higher than the net asset value of each fund unit, when the investor has the fund assets will increase; when the market supply is greater than demand, the fund price may be lower than the net asset value of each fund unit.
4, The fund's investment strategy is different. As closed-end funds cannot be redeemed at any time, the funds raised can all be used for investment, so that the fund management company can develop a long-term investment strategy to achieve long-term business performance.
