Closed Fund

A Closed Fund is a fund that is closed to new investors (either temporarily or permanently). Since most mutual funds make money off a larger asset base it may be puzzling as to why a fund would be closed. But it becomes more difficult for a fund to generate higher returns if the asset base grows too large. Some funds may specialize in small cap stocks for example, and a large asset base would make it difficult for fund managers to fully expose the fund to smaller opportunities. Therefore they would close the fund to prevent it from getting too big to effectively exploit opportunities in their area of expertise.

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