A closed-end fund is a investment fund whose shares can not be sold, only the fund can be sold with its entire stock package and is traded like a share. As such the outcome makes up for being sold and distributed among the shareholders.
The purpose of buying this fund is to gamble with the recovery by buying it at a discount to the value of individual stocks that comprise the combined value and dispose it as close to the value of the sum of stock its made up of. Other forms of recovery consist of the increased demand by sector or by the actions that occur representing an upward movement of the stock market dragging with it the titles listed therein.
If there is a very large discount in the trading price of the fund in the sum of stock prices, it is transformed into a compulsory mutual fund. And differs from the exchange traded fund (ETF), where there is significant discount.
The investor commits himself over the term of the investment. A stock exchange or a daily pricing linked with the option of returning to the initiator, such as investment funds can not exist by design.
Closed-end funds can usually be invested in contrast to mutual funds, only in a specific placement period, after which time the fund is closed. The purchaser of a share in closed-end fund entity (usually a limited partner) bears corresponding opportunities and risks.
Goal of participation is to generate operating income in the form of annual dividends. The total income will exceed the investment cost. Common capital for closed-end funds are: commercial real estate at home and abroad, commercial vessels of all sizes and types including: container and special ships, tankers or wind, solar, biomass, geothermal power plants. In addition to capital life insurance (supplementary pension), private-equity (equity participation), as well as airplanes, trains etc.
The tax treatment of closed funds depends on the activities of the fund and its legal form. Typically, the investor utilizes either income from rental or leasing income from trade or, in rare cases it may have also other income.
There is a wide range of income opportunities that are rooted in the different market segments. To assess the earnings prospects of participation, is the key success factor of various asset classes.
A sale of shares prior to the dissolution of the fund is only possible if you find yourself a buyer for it. The price is based, as always on supply and demand. To date, no functioning secondary market has been established for such shares, even if there are attempts such through the stock exchange broker involvement.