What is a closed end fund

A closed end fund is a mutual fund scheme where the investment is locked in for a specified period of time. Investors can subscribe to these schemes only during the offer period and can redeem their units only after the lock in period or the tenure of the scheme. Some closed end funds becomes open ended after the completion of the lock in period. Investment experts argue that the closed end funds are ideal for long term equity investors because the lock in period ensures that the investor stays invested in the fund at least for a specified length of time which enables them to good capital appreciation. The other argument in favour of closed end funds is that the lock in period ensures that the asset under management (AUM) of the fund is stable which enables the fund manager to invest in stocks where there is long term value and growth potential, without worrying about redemption pressures.