Closed-End Market Poised for a Rebound --- New Funds Lure Yield-Hungry Investors
After two moribund years, the market for closed-end funds finally may be back, with two new funds launching last week and one garnering more than $1 billion, the largest such total since 2007.</br></br>The closed-end-fund business was hit hard by the financial crisis, with just two new funds appearing in 2008 and 13 funds last year, according to research firm Thomas J. Herzfeld Advisors. Before last week, six funds had launched in 2010, but none attracted more than about $500 million.</br></br>"It's been challenging for a while," said Herzfeld analyst Cecilia Gondor.</br></br>Unlike conventional mutual funds that create new shares whenever investors want to buy in, closed-end funds typically raise money just once, in an initial public offering designed to reach individual investors through financial advisers, a process that often involves heavy commissions. The funds then trade on an exchange at prices that may or may not match the value of the fund's underlying holdings.</br></br>Closed-end funds held about $233 billion at the end of April, according to the Investment Company Institute.