Mutual Funds – All you need to know
Quick Questions, Key Terms, and Scheme Rankings
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NS Wealth Research
Close-Ended Mutual Funds – Meaning & Key Features
Key Mutual fund Terms
Close-ended mutual funds operate differently from open-ended schemes because they accept investments only during a specific subscription window.
Important characteristics of close-ended funds include:
Limited Subscription Period
Investors can participate in the scheme only during the New Fund Offer (NFO). Once the subscription period ends, no additional investments are allowed.
Fixed Investment Tenure
These funds have a predetermined maturity period, often ranging from three to five years.
No Regular Redemption with Fund House
Unlike open-ended funds, investors cannot redeem units directly with the fund house before maturity.
Listing on Stock Exchanges
To provide liquidity, many close-ended funds are listed on stock exchanges where investors may buy or sell units.
Long-Term Investment Strategy
Because fund managers do not face frequent redemptions, they can focus on long-term strategies without worrying about sudden withdrawals.
Potential Liquidity Constraints
Although listed on exchanges, trading volumes may sometimes be limited, which could affect the ability to sell units quickly.
Close-ended mutual funds are generally suitable for investors who are comfortable locking in their investments for a specific period and who want exposure to strategies that require time to deliver results.
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New Fund Offer
When a new restaurant opens in a neighborhood, curious customers often want to be among the first to experience it. In the investment world, a New Fund Offer (NFO) creates a similar sense of curiosity and opportunity. ( READ MORE)