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1.
Declining tax efficiency in a closed fund is attributable to _______.
The closing itself.
2.
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.
3.
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.
4.
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.
5.
With regard to funds that are closing, it's best to _______.
Buy a fund after it reopens. Reopening is often a sign that an asset class is being overlooked.
