Can a closed-end fund “go broke?
It is very unlikely. Keep in mind that the fund is an investment company that is prohibited by law from engaging in active business enterprise, other than of an investment nature. The fund can’t go broke because it moves into an unproductive line of business, or if all its markets and customers disappear. Assuming the fund’s fiduciaries do their job in safeguarding assets, the only way a closed-end fund can go broke would be for all its portfolio holdings to become worthless, an extremely remote possibility.
An investment company is prohibited by law from engaging in active business enterprise, other than of an investment nature. The fund can’t go broke because it moves into an unproductive line of business, or if all its markets and customers disappear. Assuming the fund’s fiduciaries do their job in safeguarding assets, the only way a closed-end fund can go broke would be for all its portfolio holdings to become worthless.
