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1.
Once a fund closes to new investors, it will not reopen.
False. Many funds have reopened, some of them more than once.
2.
When a closed fund reopens, it might be a sign to investors that _______.
An asset class is being overlooked and is worth a second look.
3.
If a fund is going to close, what's the best way to do it?
Announce a target asset size and close when it reaches that target. Funds that close at preset targets tend to continue to perform well after their closings.
4.
Most funds, after they close to new investors, experience worsened tax efficiency.
True. When funds close, returns may slow and tax efficiency may worsen.
5.
Why might a closed fund's returns slow down after a closing?
Because funds that close are usually experiencing abnormally high returns that must eventually come back down to earth. Funds usually close when inflows turn into torrents--and that usually happens when funds are undergoing a period of extraordinary performance. Performance often goes back to average (or worse).
