--- title: "Closed-End Fund | Altss Glossary" description: "A closed-end fund is a fund whose investors cannot redeem their interests on demand; in US law it is a management investment company that is not open-end,…" canonical: "https://altss.com/glossary/closed-end-fund" --- Glossary · Fund / vehicle structure # Closed-End Fund Also called: closed-ended fund · drawdown fund · closed end private fund In US securities law a closed-end company is any management investment company other than an open-end company, that is, one that is not offering and has no outstanding redeemable securities of which it is the issuer (Investment Company Act section 5(a)); in private markets the term usually means a closed-ended drawdown fund with a fixed term. A closed-end fund is a fund whose investors cannot redeem their interests on demand; in US law it is a management investment company that is not open-end, and in private markets usually a fixed-term drawdown fund. Publisher: Altss LLCPublished 2026-01-06Content modified 2026-10-02 ALTSS-STRUCT-007 In a closed-end fund investors cannot hand their shares or interest back to the fund for cash on demand. In a private equity or private credit fund an investor commits capital, the manager draws it over several years, and money comes back as investments are sold, typically over ten or more years. In a listed closed-end fund liquidity comes from selling shares on an exchange to another investor. ## Two meanings **Registered closed-end fund (US).** Investment Company Act section 5(a) divides management companies into open-end companies, which offer for sale or have outstanding redeemable securities they issued, and closed-end companies, which are all other management companies. Registered closed-end funds may be listed on an exchange or unlisted. [Interval funds](https://altss.com/glossary/interval-fund) and tender offer funds are registered closed-end funds that provide limited, periodic repurchases. A [business development company](https://altss.com/glossary/business-development-company) (BDC) is a closed-end company that elects BDC regulation. **Closed-ended private fund (market usage).** A private fund, usually a [limited partnership](https://altss.com/glossary/limited-partnership), with fixed commitments, an [investment period](https://altss.com/glossary/investment-period), a fixed [term](https://altss.com/glossary/term-fund-life) and no redemption right. Capital is called as needed and returned through distributions. This is the standard design for private equity, venture capital, most private credit and closed-end real estate and infrastructure funds. ## How a closed-ended private fund works Investors make [capital commitments](https://altss.com/glossary/capital-commitment) at one or more closings. The GP calls capital during the investment period, invests it, and distributes proceeds as investments are realised, with the waterfall allocating profits between LPs and the GP. There is no redemption: an LP that needs liquidity sells its interest in a [secondary](https://altss.com/glossary/secondaries) transaction, subject to GP consent. Because the manager controls the timing of cash flows, performance is reported with money-weighted measures such as IRR and multiples; the Global Investment Performance Standards (GIPS) permit money-weighted returns where the firm controls external cash flows and the fund is closed-end, fixed-life or fixed-commitment, or holds illiquid investments as a significant part of its strategy. ## EU treatment Under the Alternative Investment Fund Managers Directive (AIFMD) both open-ended and closed-ended funds can be alternative investment funds (AIFs), and the distinction drives obligations such as liquidity management. Commission Delegated Regulation (EU) No 694/2014 draws the line: an AIF is open-ended if its units are repurchased or redeemed out of its assets at a holder's request before its liquidation or wind-down phase, under the procedures and frequency set in its documents; every other AIF is closed-ended. Distribution-related capital decreases and the possibility of trading units on a secondary market do not count as redemption. AIFMD's lighter regime for smaller managers sets a higher threshold (EUR 500 million) for managers of unleveraged AIFs with no redemption rights exercisable for five years after initial investment, a definition that captures typical closed-ended private funds. AIFMD II (Directive (EU) 2024/927), applying from 16 April 2026 through national transposition, caps the leverage of a loan-originating AIF, measured as exposure under the commitment method divided by net asset value, at 175% if it is open-ended and 300% if it is closed-ended; Managers of loan-originating AIFs constituted before 15 April 2024 are deemed to comply with the caps until 16 April 2029; separately, they must not increase leverage that is already above the caps and, where it is below the caps, must not raise it above them. The deemed compliance has no time limit for such AIFs that raise no additional capital after 15 April 2024 (Directive 2011/61/EU Article 61(6), as inserted by Directive (EU) 2024/927). ## Closed-end vs other structures Compared with an [open-end fund](https://altss.com/glossary/open-end-fund), a closed-end fund avoids forced selling to meet redemptions, which suits illiquid assets. Compared with an [evergreen fund](https://altss.com/glossary/evergreen-fund), it has a defined end and a defined vintage, which makes benchmarking by [vintage year](https://altss.com/glossary/vintage-year) possible. Compared with a [semi-liquid fund](https://altss.com/glossary/semi-liquid-fund), it offers no periodic liquidity at all, but also no liquidity mismatch. ## Not the same as - [Open-End Fund](https://altss.com/glossary/open-end-fund): An open-end fund issues redeemable securities; investors can require the fund to buy back their interest at NAV, subject to its terms. - [Interval Fund](https://altss.com/glossary/interval-fund): An interval fund is a registered closed-end fund (or BDC) that, under a fundamental policy adopted under Rule 23c-3, makes repurchase offers for 5% to 25% of its outstanding common stock every three, six or twelve months. - [Evergreen Fund](https://altss.com/glossary/evergreen-fund): Evergreen describes the absence of a fixed term; a fund can be closed-end and evergreen at once (for example a listed closed-end fund). ## How it is classified - Ask first whether investors have a right to redeem their interests at (approximately) NAV. If yes, the fund is open-end, whatever its name, even if gates and notice periods limit the right. - If there is no redemption right and liquidity comes only from sale to a third party, exchange listing, discretionary issuer tender offers or Rule 23c-3 repurchase offers, the fund is closed-end in the Investment Company Act sense. - Classify term separately from liquidity: "evergreen" or "perpetual" describes the absence of a fixed term; open-end, closed-end and semi-liquid describe the liquidity mechanism. - Classify the regulatory wrapper separately again: unregistered private fund (3(c)(1)/3(c)(7)), registered closed-end fund, BDC, real estate investment trust (REIT), UCITS, AIF, European long-term investment fund (ELTIF), long-term asset fund (LTAF). ## Common mistakes - Using "closed-end fund" only in the private-equity sense when the context is US registered funds, or vice versa. - Describing hedge funds as closed-end. Most hedge funds are open-ended, with periodic redemptions. - Calling the absence of redemption rights in a drawdown fund a "lock-up". There is no redemption right to lock. ## Edge cases - A closed-end private fund may still permit transfers and GP-led liquidity options, which do not make it open-end. - Listed closed-end funds often trade at a discount or premium to NAV because liquidity comes from the market, not the fund. ## External standards | Standard | Relation | Note | | --- | --- | --- | | GIPS 2020 Standards for Firms (Provision 1.A.35 (conditions for money-weighted returns)) | related | Money-weighted returns may be presented where the firm controls external cash flows and the fund is closed-end, fixed-life or fixed-commitment, or holds illiquid investments as a significant part of its strategy. | ## Sources - [17 CFR 270.23c-3 - Repurchase offers by closed-end companies (interval funds)](https://www.law.cornell.edu/cfr/text/17/270.23c-3). U.S. Securities and Exchange Commission (CFR text via eCFR; LII mirror), eCFR current as of 2026-09-29; last amended 2021-08-01. Status: in force (checked 2026-10-01). 17 CFR 270.23c-3(a)(1), (a)(3), (b) introductory text, (b)(2)(i) — supports: Interval funds are registered closed-end companies or BDCs making periodic repurchase offers (every 3, 6 or 12 months) of 5% to 25% under a fundamental policy - [15 U.S.C. 80a-2 - Definitions (Investment Company Act sec. 2, incl. 2(a)(48) BDC and 2(a)(51) qualified purchaser)](https://www.law.cornell.edu/uscode/text/15/80a-2). U.S. Congress (United States Code; LII mirror), Current US Code text as published by LII (accessed 2026-10-01). Status: in force (checked 2026-10-01). Sec. 2(a)(48) — supports: A BDC is a closed-end company that has elected BDC treatment - [Directive 2011/61/EU on Alternative Investment Fund Managers (AIFMD)](https://eur-lex.europa.eu/eli/dir/2011/61/oj/eng). European Parliament and Council, Official Journal of the EU, L 174, 1.7.2011, Adopted 8 June 2011; transposition by 22 July 2013. Status: In force; amended by Directive (EU) 2024/927 (AIFMD II) (checked 2026-10-01). Art. 3(2)(b), Art. 16(1) — supports: EUR 500m threshold for unleveraged AIFs with no redemption rights for five years; liquidity management required for every AIF other than an unleveraged closed-ended AIF - [Directive (EU) 2024/927 amending Directives 2011/61/EU and 2009/65/EC (AIFMD II)](https://eur-lex.europa.eu/eli/dir/2024/927/oj/eng). European Parliament and Council, Official Journal of the EU, L series, 26.3.2024, Adopted 13 March 2024; Member States to adopt and apply measures by 16 April 2026 (some reporting provisions later). Status: In force; transposition deadline passed 16 April 2026; national transposition status varies by Member State (checked 2026-10-01). Art. 1(7) (inserting Directive 2011/61/EU Art. 15(4b)); Art. 1(1) (Art. 4(1)(at), loan-originating AIF); Art. 1(24)(b) (inserting Art. 61(6), transitional provision); Art. 3(1) — supports: Leverage caps of 175% (open-ended) and 300% (closed-ended) for loan-originating AIFs, commitment method exposure over NAV; loan-originating AIFs constituted before 15 April 2024 deemed compliant until 16 April 2029 (no increase above the limits), and without time limit if they raise no additional capital after 15 April 2024; apply from 16 April 2026 as transposed - [Global Investment Performance Standards (GIPS) for Firms 2020](https://www.gipsstandards.org/wp-content/uploads/2021/03/2020_gips_standards_firms.pdf). CFA Institute, 2020 edition; effective 1 January 2020; required for GIPS Reports with periods ending on or after 31 December 2020. Status: Current (checked 2026-10-01). 1.A.35 — supports: Money-weighted returns permitted where the firm controls external cash flows and the fund has at least one of: closed-end, fixed life, fixed commitment, illiquid investments as a significant part of the strategy - [15 U.S.C. 80a-5 - Subclassification of management companies (ICA s.5)](https://www.law.cornell.edu/uscode/text/15/80a-5). U.S. Congress (US Code via LII), Current US Code text as published by LII (accessed 2026-10-01). Status: in force (checked 2026-10-01). Sec. 5(a)(1), (a)(2) — supports: Open-end company = management company offering or having outstanding redeemable securities it issued; closed-end company = any other management company - [Commission Delegated Regulation (EU) No 694/2014 (RTS determining types of AIFMs: open-ended vs closed-ended)](https://eur-lex.europa.eu/legal-content/EN/TXT/PDF/?uri=CELEX:32014R0694). European Commission (Official Journal), Adopted 17 December 2013 (original OJ text). Status: in force (checked 2026-10-01). Art. 1(2), (3) — supports: Open-ended AIF defined by repurchase or redemption at a holder's request before liquidation or wind-down; distribution-related capital decreases and secondary-market trading disregarded; closed-ended AIF = any other AIF ## Related terms 8 terms - [Open-End Fund](https://altss.com/glossary/open-end-fund) - [Evergreen Fund](https://altss.com/glossary/evergreen-fund) - [Semi-Liquid Fund](https://altss.com/glossary/semi-liquid-fund) - [Business Development Company (BDC)](https://altss.com/glossary/business-development-company) - [Limited Partnership (LP)](https://altss.com/glossary/limited-partnership) - [Fund Term (Fund Life)](https://altss.com/glossary/term-fund-life) - [Fund Structure](https://altss.com/glossary/fund-structure) - [Interval Fund](https://altss.com/glossary/interval-fund) ## Referenced by 4 terms - [Alternative Investments (Alternative Assets)](https://altss.com/glossary/alternative-assets) - [Private Capital (Private Markets)](https://altss.com/glossary/private-capital) - [Real Estate Private Equity (REPE)](https://altss.com/glossary/real-estate-private-equity) - [Secondary Pricing](https://altss.com/glossary/secondary-pricing) ## Concept record Concept ID ALTSS-STRUCT-007 Classification Fund / vehicle structure Topics Fund structures Jurisdiction US; EU; INTL Version 2.0.0 Last reviewed 2026-10-02 Structured data [JSON](https://altss.com/reference/concepts/closed-end-fund.json) Source check Legal and regulatory statements checked against the cited primary sources on 2026-10-02 ([how](https://altss.com/methodology)). General information, not advice. ## Canonical URL https://altss.com/glossary/closed-end-fund