Closed To New Investors

DEFINITION of 'Closed To New Investors'

Mutual funds and hedge funds that do not accept investments from those who are not already existing investors in such funds. While these funds are closed to new investors, in most cases they may allow existing investors to add to their holdings.


A situation where a fund shuts its doors to new investors is likely to arise when a fund has already attracted large inflows from investors over a period of time, usually due to successful investment performance. As a result, it has probably grown to such a size in terms of assets that the fund managers believe continued outperformance may be increasingly difficult.

BREAKING DOWN 'Closed To New Investors'

The decision to close a fund to new investors is not an easy one to make, since the fund is potentially giving up a significant amount of management fee income. However, the very act of turning away new investors may enhance the attraction of the fund to certain investors, ensuring that it can attract substantial inflows if and when it opens up to new investors. The caveat here is that the fund needs to continue to be an outperformer during the period when it is closed to the public.

RELATED TERMS
  1. Closed To New Accounts

    When an investment vehicle is no longer accepting new investors, ...
  2. Open-End Fund

    A type of mutual fund that does not have restrictions on the ...
  3. Fund Of Funds

    A mutual fund that invests in other mutual funds. This method ...
  4. Investment Fund

    A supply of capital belonging to numerous investors that is used ...
  5. Mutual Fund

    An investment vehicle that is made up of a pool of funds collected ...
  6. Institutional Fund

    A fund that targets high value investors with low management ...
Related Articles
  1. Professionals

    Fund of Funds Investing

    CFA Level 1 - Fund of Funds Investing. Learn the characteristics of the fund of funds investing style. Discusses the benefits and drawbacks of this type of fund
  2. Mutual Funds & ETFs

    5 Characteristics of Strong Mutual Fund Shares

    Discover some of the basic characteristics shared by good mutual funds that investors can use to help them in selecting funds.
  3. Mutual Funds & ETFs

    3 Mutual Funds That Are Closed to New Investors

    Discover why some mutual funds choose to close to new investors, and learn about some of the factors that go into deciding whether to close.
  4. Retirement

    Analyzing The Best Retirement Plans And Investment Options: Mutual Funds

    What they are: A professionally managed pool of stocks, bonds and/or other instruments that is divided into shares and sold to investors. Pros: Diversification; liquidity; simplicity; ...
  5. Investing

    Advising FAs: Explaining Mutual Funds to a Client

    More than 80 million people, or half of the households in America, invest in mutual funds. No matter what type of investor you are, there is bound to be a mutual fund that fits your style.
  6. Mutual Funds & ETFs

    Hedge Funds: Funds Of Funds

    By Dan BarufaldiFunds of hedge funds are an alternative to investing directly into individual funds. There are advantages and disadvantages to funds of funds, and the benefits to an investor ...
  7. Investing Basics

    Liquidation Blues: When Mutual Funds Close

    Underperforming funds often close their doors, leaving investors down and out.
  8. Mutual Funds & ETFs

    Mutual Funds: Different Types Of Funds

    No matter what type of investor you are, there is bound to be a mutual fund that fits your style. According to the last count there are more than 10,000 mutual funds in North America! That means ...
  9. Mutual Funds & ETFs

    5 Secrets You Didn’t Know About Mutual Funds

    Learn five of the "secrets" about mutual funds that can have a significant impact on mutual fund choices and investor profitability.
  10. Mutual Funds & ETFs

    Trading Mutual Funds For Beginners

    Learn about the basics of trading and investing in mutual funds. Understand how the fees charged by mutual funds can impact the performance of an investment.
RELATED FAQS
  1. Where does a hedge fund get its money?

    Learn how a hedge fund is structured and how the managing partner of the fund goes about the process of finding and soliciting ... Read Answer >>
  2. Can mutual funds invest in hedge funds?

    Learn about mutual fund portfolio management techniques and mutual funds' ability to invest in hedge funds, as well as new ... Read Answer >>
  3. How do I calculate the loan-to-value ratio using Excel?

    Learn what a mutual fund and a money market fund are, and understand the differences between each and how they serve various ... Read Answer >>
  4. Do hedge funds invest in mutual funds?

    Learn whether hedge funds invest in mutual funds. They are permitted to invest in mutual funds but usually avoid doing so ... Read Answer >>
  5. What is the purpose of a hedge fund?

    Find out what a hedge fund is, how it is set up and why it is different than other forms of investment partnerships like ... Read Answer >>
  6. How do I judge a mutual fund's performance?

    Evaluate mutual fund performance utilizing resources such as Morningstar; compare the fund with others in its peer group ... Read Answer >>
Hot Definitions
  1. Return On Invested Capital - ROIC

    A calculation used to assess a company's efficiency at allocating the capital under its control to profitable investments. ...
  2. Law Of Demand

    A microeconomic law that states that, all other factors being equal, as the price of a good or service increases, consumer ...
  3. Cost Of Debt

    The effective rate that a company pays on its current debt. This can be measured in either before- or after-tax returns; ...
  4. Yield Curve

    A line that plots the interest rates, at a set point in time, of bonds having equal credit quality, but differing maturity ...
  5. Stop-Limit Order

    An order placed with a broker that combines the features of stop order with those of a limit order. A stop-limit order will ...
  6. Keynesian Economics

    An economic theory of total spending in the economy and its effects on output and inflation. Keynesian economics was developed ...
Trading Center