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Funds 409: Chasing Closing Funds

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1.
Which is not true about most funds after they close?
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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.
2.
Some fund companies make plans to close even before they roll out.
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True. This is a strategic move on their parts.
3.
Closings work best for which types of funds?
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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.
When a closed fund reopens, it might be a sign to investors that _______.
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An asset class is being overlooked and is worth a second look.
5.
What does the "closed" in "closed funds" mean?
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It is not accepting new investors. Closed funds are those that are barring new investors.