Ch.7 · Total Expense Ratio Limits · medium
What is the pricing mechanism for close-ended fund units on stock exchanges?
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EXPLANATION
Close-ended fund units listed on stock exchanges trade at market-determined prices based on supply and demand. They commonly trade at a discount to NAV due to limited liquidity and lack of buyer interest. Premiums are rare but possible if investor sentiment is strongly positive. This discount/premium is the key difference between exchange price and underlying NAV for close-ended funds.
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