Closed end funds, by definition, are fixed capital that is traded publicly by an initial public offering. The closed end funds are structures and listed as stocks on the stock exchanges. The closed end funds have also been referred to as a closed end investment or a closed end mutual fund, but that is determined by the sale and usage of the closed end funds at the time of the initial sale offering.
The closed end funds have much more in common with the mutual funds than they do with trading stocks on the stock exchange, but they are treated as if they were stocks. The closed end funds are not a true stock because they are not offered through the clearinghouses as many of the common stock are during trading hours. The closed end funds are offered up as stock on a periodic basis and only in limited quantity. When the offering has been completed, they are packaged and placed back in the owner’s vault until the next time.
The monetary value of the closed end funds is determined by the stock market activity of the day or days that the closed end funds are put up for offering as a common stock. The closed end funds have a quality that most other funds do not share and that is that they are not redeemable at any time. The original investor who places his or her closed end funds as an offering of the stock market to be treated as a sale of common stock is never expected or required to purchase the closed end fund back once it has been sold. This makes the closed end funds very different from other tradable commodities being offered on the stock market.
In most instances, once the trading period of the closed end stock has been completed they must be removed from the market floor because the general function of the closed end funds is as a security. The closed end funds must remain removed from the floor of the stock exchange for a period of one week and preferably for a longer period of time before given permission to be offered as a stock again.
There are many varieties of closed end funds and each reflect a different investment objective for the personal portfolio of the individual or corporation who has ownership. When the closed end funds are chosen as a sale item as common stock offerings, they are exposed to the volatility of the stock market. This can have a detrimental affect on the closed end funds because now they are subjected to the sale rising or falling depending upon what the market is being faced with when the closed end funds are offered.