GENERAL SURVEY

Closed-end investment companies differ from open-end com panies (mutual funds) in three important respects:

1. Closed-end companies do not constantly sell shares in order to raise additional money. As a rule, the capitalization of closed-end companies changes infrequently, if at all.

2. Prices of closed-end-company shares are determined (like the quotations of all shares other than those of open-end com panies) by supply and demand. Closed-end shares, therefore, may sell at, above, or below net asset value. The stocks of most important closed-end companies are listed on a national secu rities exchange.

3. Closed-end companies do not agree to redeem their out standing shares at the request of shareholders.

For many years, the aggregate capital of closed-end com panies far exceeded the funds of open-end companies. Open-end companies appeared on the scene later. In terms of net assets, closed-end companies in 1940 were still substantially larger. At the end of 1940, the net assets of closed-end com panies totaled approximately $614 million, whereas their younger brethren (mutual funds) had net assets of only $448 million. By 1949, open-end companies took the lead. Table 5 illustrates what has occurred in recent years. Certified Financial Planner - Read More.