Closed-End Management Company

A closed-end management company is an investment company that manages closed-end mutual funds and sells a limited number of shares to investors on an exchange by way of an initial public offering.

Closed-end management companies are regulated by the Investment Company Act of 1940. Closed-end management companies specialize in the management of publicly traded closed-end funds. Closed-end funds are pooled fund investments that can be managed to a wide array of strategies. These funds issue a predetermined number of shares in an initial public offering.

Closed-end mutual funds benefit from pooled fund investing and seek to obtain efficiencies through pooled management and operational economies of scale. Similar to other product offerings in the market, closed-end mutual funds can be managed to a range of different investment objectives and strategies. They can offer income-focused strategies that make regular distributions from income-producing investments.

Closed-end funds have many differences from open-end funds managed by open-end management companies. Closed-end funds do not offer a range of share classes. Closed-end management companies issue a fixed number of shares of closed-end funds to the market through initial public offerings on financial market exchanges. Closed-end management companies do not allow for purchase and sale directly from the management company. Closed-end fees are less complicated. Closed-end management companies usually do not partner with intermediaries and distributors for closed-end fund transactions, therefore, they do not require sales loads or include distribution fee expenses.

Pricing comparisons for closed-end mutual funds differ from open-end mutual funds. Closed-end management companies calculate a daily accounting net asset value (NAV) at the end of each trading day. Since closed-end funds trade on exchanges, investors can buy and sell the funds at the exchange’s market value. As an exchange-traded closed-end fund, the product’s market value will differ from its accounting NAV. Closed-end management companies can partner with calculation agents to report an indicative NAV which helps funds to trade in closer proximity to their accounting NAV.

The Closed-End Fund Center provides data on the best performing closed-end funds in the market. As of January 17, 2018, the New Germany Fund managed by Deutsche Asset Management International GMBH reported the best one-year performance return. At 61.98% the Fund significantly outperformed other market alternatives. The Fund seeks long-term capital appreciation by investing in middle-market German equities. The Fund holds approximately 45 stocks. It has assets under management of $325 million.