Closing Down Closed-End Funds…

December 1998
Journal of Financial Planning;Dec1998, Vol. 11 Issue 6, p16
Academic Journal
This article presents the results of a study on the negative effects of converting closed-end funds to open-end funds to eliminate the discount and provide for short-term gains. The study was conducted by CDA/Wiesenberger and it was found out that such a conversion is not good for long-term investors. It revealed that the conversion would result to net assets plunging an average of 28.18 percent. Cash holdings will also increase from an average of 2.43 percent to 7.75 percent to meet redemption. In addition to that, expense ratios increase from 1.33 percent to 1.89 percent. Lastly, significant capital gains are realized, causing tax headaches.


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