Series 26: Types Of Closed-End Funds

Types of Closed-End Funds

Closed-end funds include the same types of funds as open-end investment companies, such as general equity (including income and growth funds), international equity, fixed income taxable, and fixed income tax-exempt.

Municipal bond funds make up the largest category of closed-end funds, based on the amount of assets. Municipal bond funds provide investor income that is tax-exempt for federal income tax purposes. In some cases, their income is exempt from state or local income taxes. They invest in bonds issued by state and local governments and agencies.

U.S. bond funds focus on high-quality instruments, including treasuries, government agencies, and investment-grade corporate bonds. All of these produce interest income that is taxable by the federal government. Others may mix lower grade “high yield bonds” into the portfolio. Some focus on high-yield bonds for their higher rates of return (albeit a