The Lemon Fool

Sorry ... can someone very quickly remind of the difference please.

Also do CEF's have better tax advantages at drawdown?

Thank you

AiY

AsleepInYorkshire wrote:Sorry ... can someone very quickly remind of the difference please.

Hmm....CEF wasn't in the list of abbreviations I pointed you at!

From https://en.wikipedia.org/wiki/Closed-end_fund :

A closed-end fund differs from an open-end mutual fund in that:

• It is closed to new capital after it begins operating.
• Its shares (typically) trade on stock exchanges rather than being redeemed directly by the fund.
• Its shares can therefore be traded at any time during market opening hours. An open-end fund can usually be traded only at a time of day specified by the managers, and the dealing price will usually not be known in advance.
• It usually trades at a premium or discount to its net asset value. An open-end fund trades at its net asset value (to which sales charges may be added; and adjustments may be made for e.g. the frictional costs of purchasing or selling the underlying investments).
• In the United States [and the UK], a closed-end company can own unlisted securities.

Another distinguishing feature of a closed-end fund is the common use of leverage (gearing). In doing so, the fund manager hopes to earn a higher return with this additional invested capital.

AsleepInYorkshire wrote:Also do CEF's have better tax advantages at drawdown?

No.

mc2fool wrote:

AsleepInYorkshire wrote:Sorry ... can someone very quickly remind of the difference please.

Hmm....CEF wasn't in the list of abbreviations I pointed you at!

From https://en.wikipedia.org/wiki/Closed-end_fund :

A closed-end fund differs from an open-end mutual fund in that:

• It is closed to new capital after it begins operating.
• Its shares (typically) trade on stock exchanges rather than being redeemed directly by the fund.
• Its shares can therefore be traded at any time during market opening hours. An open-end fund can usually be traded only at a time of day specified by the managers, and the dealing price will usually not be known in advance.
• It usually trades at a premium or discount to its net asset value. An open-end fund trades at its net asset value (to which sales charges may be added; and adjustments may be made for e.g. the frictional costs of purchasing or selling the underlying investments).
• In the United States [and the UK], a closed-end company can own unlisted securities.

Another distinguishing feature of a closed-end fund is the common use of leverage (gearing). In doing so, the fund manager hopes to earn a higher return with this additional invested capital.

AsleepInYorkshire wrote:Also do CEF's have better tax advantages at drawdown?

No.

A couple of other differences:

1) OEICs do not attract stamp duty upon purchase. Closed-end funds, at least in the form of UK investment trusts, do have stamp duty.

2) OEICs are regulated as funds. Closed-end funds, at least in the form of UK investment trusts, are corporations and are regulated and operated as such.

The third classification are exchange-traded funds (ETFs), which can be seen as a hybrid of OEICs and CEFs. There is no stamp duty on ETFs. You can also short them and there are often listed options on them.