Open-end fund
Encyclopedia
An open-end fund is a collective investment scheme
which can issue and redeem shares at any time. An investor will generally purchase shares in the fund directly from the fund itself rather than from the existing shareholders. It contrasts with a closed-end fund
, which typically issues all the shares it will issue at the outset, with such shares usually being tradeable between investors thereafter.
Open-ended funds are available in most developed countries, though terminology and operating rules vary. U.S. mutual fund
s, UK unit trust
s and OEICs, European SICAV
s, hedge fund
s and exchange-traded fund
s are all examples of open-ended funds.
The price at which shares in an open-ended fund are issued or can be redeemed will vary in proportion to the net asset value
of the fund, and therefore directly reflects the fund's performance.
Some of the fees cover the cost or distributing the fund by paying commission to the adviser or broker that arranged the purchase. These fees are commonly referred to as 12b-1 fees in U.S.
Not all fund have initial charges; if there are no such charges levied, the fund is "no-load" (US).
These charges may represent profit for the fund manager or go back into the fund.
s are now growing in popularity. Index funds are open-end funds that attempt to replicate an index, such as the S&P 500, and therefore do not allow the manager to actively choose securities to buy.
), is calculated by dividing the fund's assets minus liabilities by the number of shares outstanding. This is usually calculated at the end of every trading day.
s are typically open-ended and actively managed. However, their NAV is typically calculated monthly.
mutual fund
s:
Collective investment scheme
A collective investment scheme is a way of investing money alongside other investors in order to benefit from the inherent advantages of working as part of a group...
which can issue and redeem shares at any time. An investor will generally purchase shares in the fund directly from the fund itself rather than from the existing shareholders. It contrasts with a closed-end fund
Closed-end fund
A closed-end fund is a collective investment scheme with a limited number of shares. It is called a closed-end fund because new shares are rarely issued once the fund has launched, and because shares are not normally redeemable for cash or securities until the fund liquidates.Typically an...
, which typically issues all the shares it will issue at the outset, with such shares usually being tradeable between investors thereafter.
Open-ended funds are available in most developed countries, though terminology and operating rules vary. U.S. mutual fund
Mutual fund
A mutual fund is a professionally managed type of collective investment scheme that pools money from many investors to buy stocks, bonds, short-term money market instruments, and/or other securities.- Overview :...
s, UK unit trust
Unit trust
A unit trust is a form of collective investment constituted under a trust deed.Found in Australia, Ireland, the Isle of Man, Jersey, New Zealand, South Africa, Singapore, Malaysia and the UK, unit trusts offer access to a wide range of securities....
s and OEICs, European SICAV
SICAV
A SICAV is an open-ended collective investment scheme common in Western Europe, especially Luxembourg, Switzerland, Italy, Spain, Belgium and France...
s, hedge fund
Hedge fund
A hedge fund is a private pool of capital actively managed by an investment adviser. Hedge funds are only open for investment to a limited number of accredited or qualified investors who meet criteria set by regulators. These investors can be institutions, such as pension funds, university...
s and exchange-traded fund
Exchange-traded fund
An exchange-traded fund is an investment fund traded on stock exchanges, much like stocks. An ETF holds assets such as stocks, commodities, or bonds, and trades close to its net asset value over the course of the trading day. Most ETFs track an index, such as the S&P 500 or MSCI EAFE...
s are all examples of open-ended funds.
The price at which shares in an open-ended fund are issued or can be redeemed will vary in proportion to the net asset value
Net asset value
Net asset value is a term used to describe the value of an entity's assets less the value of its liabilities. The term is most commonly used in relation to open-ended or mutual funds because shares of such funds registered with the U.S. Securities and Exchange Commission are redeemed at their net...
of the fund, and therefore directly reflects the fund's performance.
Fees
There may be a percentage charge levied on the purchase of shares or units. Some of these fees are called an initial charge (UK) or 'front-end load' (US). Some fees are charged by a fund on the sale of these units, called a 'close-end load,' that may be waived after several years of owning the fund.Some of the fees cover the cost or distributing the fund by paying commission to the adviser or broker that arranged the purchase. These fees are commonly referred to as 12b-1 fees in U.S.
Not all fund have initial charges; if there are no such charges levied, the fund is "no-load" (US).
These charges may represent profit for the fund manager or go back into the fund.
Active management
Most open-end funds are actively managed, meaning that a portfolio manager picks the securities to buy, although index fundIndex fund
An index fund or index tracker is a collective investment scheme that aims to replicate the movements of an index of a specific financial market, or a set of rules of ownership that are held constant, regardless of market conditions.-Tracking:Tracking can be achieved by trying to hold all of the...
s are now growing in popularity. Index funds are open-end funds that attempt to replicate an index, such as the S&P 500, and therefore do not allow the manager to actively choose securities to buy.
Net asset value
The price per share, or NAV (net asset valueNet asset value
Net asset value is a term used to describe the value of an entity's assets less the value of its liabilities. The term is most commonly used in relation to open-ended or mutual funds because shares of such funds registered with the U.S. Securities and Exchange Commission are redeemed at their net...
), is calculated by dividing the fund's assets minus liabilities by the number of shares outstanding. This is usually calculated at the end of every trading day.
Hedge funds
Hedge fundHedge fund
A hedge fund is a private pool of capital actively managed by an investment adviser. Hedge funds are only open for investment to a limited number of accredited or qualified investors who meet criteria set by regulators. These investors can be institutions, such as pension funds, university...
s are typically open-ended and actively managed. However, their NAV is typically calculated monthly.
Examples
U.S.United States
The United States of America is a federal constitutional republic comprising fifty states and a federal district...
mutual fund
Mutual fund
A mutual fund is a professionally managed type of collective investment scheme that pools money from many investors to buy stocks, bonds, short-term money market instruments, and/or other securities.- Overview :...
s:
- T. Rowe PriceT. Rowe PriceT. Rowe Price is a publicly owned Investment firm, headquartered in Baltimore, Maryland. It was founded in 1937 by Thomas Rowe Price, Jr.. The company offers mutual funds, subadvisory services, and separate account management for individuals, institutions, retirement plans, and financial...
- Fidelity InvestmentsFidelity InvestmentsFMR LLC or Fidelity Investments is an American multinational financial services corporation one of the largest mutual fund and financial services groups in the world. It was founded in 1946 and serves North American investors. Fidelity Ventures is its venture capital arm...
' Magellan - The Vanguard GroupThe Vanguard GroupThe Vanguard Group is an American investment management company based in Malvern, Pennsylvania, that manages approximately $1.6 trillion in assets. It offers mutual funds and other financial products and services to individual and institutional investors in the United States and abroad. Founder...
's S&P 500 - PIMCO Total Return
- WorldCommodity Fund
See also
- Collective investment schemeCollective investment schemeA collective investment scheme is a way of investing money alongside other investors in order to benefit from the inherent advantages of working as part of a group...
s - Mutual fundMutual fundA mutual fund is a professionally managed type of collective investment scheme that pools money from many investors to buy stocks, bonds, short-term money market instruments, and/or other securities.- Overview :...
s - Unit trustUnit trustA unit trust is a form of collective investment constituted under a trust deed.Found in Australia, Ireland, the Isle of Man, Jersey, New Zealand, South Africa, Singapore, Malaysia and the UK, unit trusts offer access to a wide range of securities....
s - OEICs
- SICAVSICAVA SICAV is an open-ended collective investment scheme common in Western Europe, especially Luxembourg, Switzerland, Italy, Spain, Belgium and France...
s - Closed-end fundClosed-end fundA closed-end fund is a collective investment scheme with a limited number of shares. It is called a closed-end fund because new shares are rarely issued once the fund has launched, and because shares are not normally redeemable for cash or securities until the fund liquidates.Typically an...