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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.
Which is not true about most funds after they close?
Their tax efficiency improves. When funds close, returns may slow and tax efficiency may worsen. Inflows, which are negligible once a fund closes, reduce the tax burden on all shareholders because there are more people to distribute capital gains to.
3.
Closings work best for which types of funds?
Funds that traffic in illiquid securities such as micro- and small-cap stocks. Closings are also good ideas for funds with a small number of managers and analysts, or those that employ rapid-trading strategies.
4.
A fund might decide to close because it has become too large, asset-wise.
True. Excessive assets may force the fund managers to try a change in strategy.
5.
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.
