closed fund

(redirected from Closed Funds)

Closed fund

A mutual fund that is no longer issuing shares, mainly because it has grown too large.
Copyright © 2012, Campbell R. Harvey. All Rights Reserved.

Closed Fund

A mutual fund that is closed to new investors, whether permanently or temporarily. A mutual fund's management may decide to close the fund because it may believe that there are too many investors and/or assets in the fund to generate a return appropriate to its investment strategy. Sometimes such a fund prevents even current investors from buying more shares of the fund, although this is less common. A closed fund should not be confused with a closed-end fund, which is a different concept altogether.
Farlex Financial Dictionary. © 2012 Farlex, Inc. All Rights Reserved

closed fund

A mutual fund that no longer issues shares to nonshareholders but that may continue to sell shares to existing shareholders. A fund usually closes because its management has decided the fund has grown too large to be managed effectively.
Case Study Mutual funds that have closed to new investors sometimes reopen. Managers may close a fund to new shareholders for several reasons. A fund may grow so large in assets that the portfolio becomes difficult to effectively manage. Large investment positions in individual securities can be difficult to acquire or sell without affecting the prices of securities. Thus, portfolio managers of very large funds lose flexibility because they are mostly limited to owning the stocks of large corporations with huge numbers of shares outstanding. Likewise, a mutual fund that specializes in the investments of a relatively narrow market segment may have limited investment options. A fund that concentrates on investing in small-capitalization firms or companies from developing countries is likely to face limited share availability. Investors may pour money into a successful mutual fund that the portfolio manager is unable to invest. Mutual funds often close after strong asset growth from a long bull market. For example, Janus Capital closed 7 of its 21 funds in a two-year period beginning in mid-1998. Closed funds included the popular Janus Fund, which had grown in size to $52 billion of assets. A fund that has been closed may subsequently reopen if the fund size shrinks or if the portfolio manager believes new investment opportunities have become available. A bear market may reduce the size of a fund because of reduced stock values and as a result of share redemptions by the fund's shareholders. A smaller fund means reduced income to the fund's managers, who may decide to reopen the fund to new investors. In late 2000 Fidelity Investments announced that it would reopen both its Contrafund and Growth & Income Portfolio funds to new investors after holders had withdrawn nearly $11 billion by redeeming the funds' shares.
Wall Street Words: An A to Z Guide to Investment Terms for Today's Investor by David L. Scott. Copyright © 2003 by Houghton Mifflin Company. Published by Houghton Mifflin Company. All rights reserved. All rights reserved.
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He is an analyst dedicated to the Gabelli merger arbitrage portfolios specific to its US open and closed funds and also serves as co-portfolio manager to the Gabelli Go Anywhere Trust.
The operating costs and Solvency II capital requirements of individual closed funds become disproportionately high as the business runs down, but consolidators that acquire funds from several insurers should be able to manage them more efficiently in combination.
Of the EUR 2.69 bln of assets held by investment funds in March 2016, assets of EUR 2.20 bln were held by closed funds and the remaining EUR 487.7 by open funds.
"A lot of organizations have closed funds because they believe it will reduce their ability to manage them effectively for shareholders -- that is very much a fiduciary act, thinking of investors first."
FTSE 100 Index listed Friends Life insurer Resolution, which was set up in 2008 to consolidate the life insurance industry and is a major manager of closed funds, slumped as much as 13%, while Aviva fell by 8%, Legal & General dropped by 7% and Prudential declined by 5%.
EDHEC-Risk suggests improved regulation of investment funds and properly designed incentives: incentives to invest in illiquid assets could be designed in regulated closed funds with a fixed horizon; incentives to adopt the AIFM directive must be given by modifying the prudential regulation of European institutional investors, notably insurers, and authorising them to invest directly in funds that comply with the AIFM directive; incentives to manage rather than to insure non-financial risks must be given by defining more clearly the responsibilities of distributors, asset managers, depositaries, and valuators.
Of the pounds 36bn of capital targeting the UK in 2010, DTZ Research estimates that pounds 20bn (55%) is from UK domiciled funds, approximately pounds 10bn (27%) from US and almost pounds 2bn (6%) is from German open ended funds, special funds and closed funds. The remainder is predominantly from the rest of Europe.
"In order to attract new assets, managers are offering investors various incentives that may include access to closed funds, higher levels of liquidity, greater transparency and reduced fees."
The group, which manages closed funds including the former Birmingham-based Britannic, London Life, Phoenix and NPI, said it was in a "market full of opportunities" but that the debt-funded model which had served it and others in the past was no longer appropriate.
The group, who manage closed funds including London Life, Phoenix and NPI, yesterday said they were planning an acqusition drive.
Those kinds of changes, West says, will be difficult for smaller to mid-size schools because generally they do not have access to the best managers in these asset classes due to investment minimums, frequent personnel changes, and closed funds. Also, smaller colleges are more limited in the risk profile that they can take on, he says.