Characteristics, Uses and Taxation of Investments - Closed-End Investment Companies
d. Closed-End Investment Companies: an investment company whose shares trade in the secondary market and are listed on a stock exchange or trade over-the-counter. These funds may be either actively or passively managed. Shares often sell at a premium or discount to the fund's net asset value. As distinct from an open-end mutual fund, capitalization is fixed and assets are not added to the fund; the fund manager need not concern him- or herself with a redemption plan as a result.
||Mutual Fund||Closed End Investment Company||Exchange Traded Fund|
|Capitalization||Shares are offered continuously.||There is one offering of shares.||There is one offering of shares.|
|Issues||Common stock. No fixed income.||Fixed income, common and preferred shares.||Fixed income, common and preferred shares.|
|Shares||Full or fractional are offered||Full shares only.||Full shares only.|
|Offerings and Trading||Redemption is only through the fund.||Redemption is accomplished through sale on the exchange where traded or through the Over-the-Counter market.||Redemption is accomplished through sale on the exchange where traded or through the Over-the-Counter market. Shares may be sold short without being subject to the uptick rule.|
|Pricing||Net Asset Value + Sales Charge=Public Offering Price||Forces of supply and demand determine the price. Price =current market value + commission.||Forces of supply and demand determine the price. Price =current market value + commission.|
|Shareholder Rights||Shareholders of record have rights to receive dividends and to vote.||Shareholders of record have rights to receive dividends, to vote and to receive preemptive rights.||Shareholders of record have rights to receive dividends, to vote and to receive preemptive rights.|
|Ex-Date||The fund\'s board of directors sets the ex-dividend date.||The self-regulatory agency (SRO which is either the NASD or the exchange on which the fund trades.) sets the ex-dividend date.||The self-regulatory agency (SRO which is either the NASD or the exchange on which the fund trades.) sets the ex-dividend date.|
e. Index Securities: index securities are a passive investment product, either a mutual fund or exchange traded fund that seeks to replicate the performance of a given index. Index products are used to gain low cost exposure to an asset class or subset thereof. Additionally, passive may refer to a low cost investment strategy characterized by minimal trading. Buy and hold is an example.
f. Private Equity: though technically an investment in the equity of a company that is not publicly traded, private equity is a byword for any privately held investment. The risks that apply to publicly traded equity and fixed income apply here as well with the added challenge of illiquidity. Examples are private companies, companies taken private through a leveraged buyout, private placement debt and equity. Such investment requires much time to realize profits due to the inability to exit quickly.
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