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1.
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.
2.
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).
3.
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.
4.
What does the "closed" in "closed funds" mean?
It is not accepting new investors. Closed funds are those that are barring new investors.
5.
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.
