Open-end fund (or open-ended fund) is a collective investment scheme that 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. The term contrasts with a

closed-end fund A closed-end fund (CEF), also known as a closed-end mutual fund, is an investment vehicle fund that raises capital by issuing a fixed number of shares at its inception, and then invests that capital in financial assets such as stocks and bonds. ...

, which typically issues at the outset all the shares that it will issue, with such shares usually thereafter being tradable among investors. Open-ended funds are available in most developed countries, but the terminology and operating rules vary. US

mutual fund A mutual fund is an investment fund that pools money from many investors to purchase Security (finance), securities. The term is typically used in the United States, Canada, and India, while similar structures across the globe include the SICAV in ...

s, UK unit trusts and OEICs, European SICAVs, and hedge funds 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 so directly reflects its 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 of 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 US. 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 fund An index fund (also index tracker) is a mutual fund or exchange-traded fund (ETF) designed to follow certain preset rules so that it can replicate the performance of a specified basket of underlying investments. The main advantage of index fun ...

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 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.

Forward Pricing Rule 22c-1

Based on the forward pricing rule (22c-1); funds and their principal underwriters, and dealers must sell interests in the fund based on the Net Asset Value (NAV) which is calculated daily. This helps to mitigate shareholder dilution, as well as increasing efficiency.

Hedge funds

Hedge funds are typically open-ended and actively managed. However, investors can typically redeem shares only monthly or less frequently (e.g., quarterly or semi-annually).Lemke, Lins, Hoenig and Rube, ''Hedge Funds and Other Private Funds: Regulation and Compliance'' (Thomson West, 2014-2015 ed.).

Examples

U.S.

s: * T. Rowe Price * Fidelity Investments' Magellan * The Vanguard Group's S&P 500 *

PIMCO Pacific Investment Management Company LLC (PIMCO) is an American investment management firm. While it has a specific focus on active fixed income management worldwide, it manages investments in many asset classes, including fixed income, share ca ...

Total Return *WorldCommodity Fund

References

{{DEFAULTSORT:Open-End Fund Investment funds fr:OPCVM pt:Fundo de investimento