What influences the share price of a closed-end fund?
The share price of a closed-end fund is primarily determined by market demand and supply. Because the number of shares outstanding is fixed, once the fund closes, investors who want to buy or sell shares in the fund must do so from other investors in the open market through an exchange. Therefore, if there is greater demand for a particular fund’s shares and a lower supply, the share price would likely be higher than its actual NAV (“trading at a premium”). And if market demand is low for a particular fund and supply is high, the shares would likely be trading at a price below the fund’s NAV (“trading at a discount”). A variety of other market factors can also affect the market value of a closed-end fund. The fund’s relative yield, investor preference for a particular type of investment, the liquidity of the fund’s investments, or even investors’ perceptions of a fund’s manager can influence its market price.
