Why must open end funds keep more cash on hand than closed end funds?
Why must open end funds keep more cash on hand than closed end funds?
Homework Answers
Shares issued by open end funds have to be redeemed by the fund itself on an ongoing basis. The fund has to maintain the necessary cash reserves to meet the redemption calls.
In contrast, shares of closed end funds are traded in a stock exchange and hence the fund has no outflow on account of redemption.
For the above reason, the open end funds have to maintain higher cash balances.
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Why must open end funds keep more cash on hand than closed end
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