New rules for open- and closed-ended funds

New rules for open- and closed-ended funds

The difference between open- and closed-ended funds used to be clear cut. However, new regulation in the form of the UCITS IV directive has brought changes to the open-ended structure. Simon Crinage, head of investment trusts at J.P. Morgan Asset Management, explains everything investors need to know about the new rules

Investors often reject the investment trust structure on the basis of complexity and/or on the grounds of higher risk. In reality, investment trusts are unlikely to be inherently more risky than open-ended funds, which can be just as complex.  As most investors know, closed-ended funds have a fixed pool of assets, which means they do not have to buy and sell holdings to deploy inflows and meet outflows. In contrast, open-ended funds shrink and expand according to investor redemptions and inflows, and therefore need to retain some liquid holdings to meet redemptions should they arise. ...