Open-end fund

From Wikipedia, the free encyclopedia

An open-end(ed) fund is a collective investment which can issue and redeem shares at any time. An investor can purchase shares in such funds directly from the mutual fund company, or through a brokerage house.

Open-ended funds are available in most developed countries, however terminology and operating rules vary. For example in the U.S. they are called mutual funds, in the UK they are either unit trusts or OEICs (Open-Ended Investment Companies) and in most of Europe they are SICAVs.

1 Definition
2 Fees
3 Active Management
4 Net asset value
5 Examples
6 See also
7 External links

[edit] Definition

An open-ended fund is equitably divided into shares (or units) which vary in price in direct proportion to the variation in value of the funds net asset value. Each time money is invested new shares or units are created to match the prevailing share price; each time shares are redeemed the assets sold match the prevailing share price. In this way there is no supply or demand created for shares and they remain a direct reflection of the underlying assets.

[edit] Fees

There may be a percentage charge levied on purchase or sale of shares--in this case, the fund is a "load fund"; if there are no such charges levied, the fund is "no-load". However, brokerages may charge commissions for the purchase of even no-load funds, and there might also be other fees associated with no-load funds, such as yearly maintenance fees in IRA accounts and redemption fees designed to discourage shareholders from jumping in and out of funds in an attempt at market timing.

[edit] Active Management

Most open-end funds are actively managed, meaning that a portfolio manager picks the securities to buy, although index funds 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. These fees are commonly referred to as 12b-1 fees in U.S.

[edit] Net asset value

The price per share, or NAV (net asset value), 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.