Guide to Investing in Closed-End Funds
What is a Closed-End Fund?
Unlike open-end funds, CEFs have a fixed number of shares outstanding and do not issue or redeem shares to meet investor demand. Like other publicly-traded securities, the market price of CEF shares fluctuates and is generally determined by supply and demand in the marketplace.
Typically, a closed-end fund trades in relation to its underlying net asset value (NAV). A CEF's NAV is the market value of all securities owned in the portfolio plus all other assets, minus liabilities and divided by the total number of shares outstanding. The share price of a CEF may be above (at a premium) or below (at a discount) its NAV. For example, if the market price of a fund share is $18 and its NAV is $20, then the CEF is selling at a discount of $2 per share (or 10%). On the other hand, if the market price is $21, the CEF is selling at a premium of $1 (or 5%).
This guide is not to be construed as a solicitation or an offer to buy or sell securities. The views contained herein are those of BlackRock and are based on information obtained by BlackRock from sources that are believed to be reliable. This material should not be considered tax, investment, legal or other professional advice. The information herein is not necessarily all-inclusive and is not guaranteed as to accuracy. Reliance upon information in this guide is at the sole discretion of the reader. Past performance does not guarantee future results. No assurance can be given that a fund will achieve its investment objective. The investment return and principal value of an investment will fluctuate, so that an investor's shares, when redeemed or sold, may be worth more or less than their original cost.