Open-End Fund

Legal definition in the US

Under Investment Company Act section 5(a)(1), an open-end company is a management company that offers for sale or has outstanding redeemable securities of which it is the issuer; a redeemable security entitles the holder, on presentation, to receive approximately its proportionate share of the issuer's current net assets or the cash equivalent. Section 22(e) bars a registered fund from suspending redemptions or postponing payment for more than seven days after tender, except when the New York Stock Exchange is closed or trading on it is restricted, in an emergency the Securities and Exchange Commission (SEC) determines, or as the SEC permits by order. Rule 22e-4 bars a registered open-end fund other than a money market fund from acquiring an illiquid investment if more than 15% of its net assets would then be in illiquid investments, meaning investments it reasonably expects cannot be sold in current market conditions in seven calendar days or less without significantly changing their market value. These constraints limit how much of a registered open-end fund can be invested in private assets, which is one reason private-markets products for wealth investors commonly use closed-end wrappers instead.

Private open-ended funds

Unregistered private funds relying on section 3(c)(1) or 3(c)(7) can also be open-ended. Hedge funds are predominantly open-ended: they accept subscriptions monthly or quarterly and permit redemptions on a stated frequency, subject to notice periods, lock-ups, gates and, for illiquid positions, side pockets. Open-end core real estate funds (such as the funds in the ODCE index) and open-end infrastructure funds admit capital periodically and redeem through queues. Because these funds can restrict redemptions, LPs assess liquidity terms as part of redemption analysis rather than assuming access to capital on demand.

EU and UK open-ended funds

UCITS are open-ended by design and limited to liquid assets. Alternative investment funds (AIFs) may also be open-ended, and under the 2024 amendments to the Alternative Investment Fund Managers Directive (AIFMD II) which applies from 16 April 2026 through national transposition, their managers must select at least two liquidity management tools for each open-ended AIF (one is enough for an AIF authorised as a money market fund) from a list in the directive: redemption gates, extension of notice periods, redemption fees, swing pricing, dual pricing, anti-dilution levies and redemptions in kind, and the selection may not consist of swing pricing and dual pricing alone. Suspension of redemptions and side pockets are listed separately in the same annex. The UK LTAF is an open-ended fund authorised by the Financial Conduct Authority for long-term illiquid assets; redemptions may be no more frequent than monthly and need a notice period of at least 90 days. ELTIFs may offer redemptions during their life under ELTIF 2.0, subject to conditions such as a minimum holding period and a redemption policy, detailed in the 2024 regulatory technical standards.

What is not an open-end fund

Non-traded real estate investment trusts (REITs) and non-traded business development companies (BDCs) are often described loosely as "open-ended" or "perpetual", but they do not issue redeemable securities: they offer share repurchase programmes or tender offers that the board can limit, prorate or suspend. A non-traded BDC is a closed-end company under the Investment Company Act. Interval funds and tender offer funds are registered closed-end funds. These are better classified as semi-liquid funds.

Fees and performance measurement

Open-end funds charge fees on NAV rather than on commitments. Many also charge a performance fee or performance allocation on NAV gains, usually above a high-water mark: this is standard in hedge funds and common in semi-liquid private-markets vehicles. Because investors, not the manager, control external cash flows, open-end funds report time-weighted returns.

Not the same as

• Closed-End Fund: A closed-end fund issues no redeemable securities; liquidity comes from sale, listing, tender or repurchase offers, or distributions.
• Evergreen Fund: Evergreen means no fixed term; an evergreen fund may be open-end, semi-liquid or have no liquidity at all.
• Semi-Liquid Fund: Semi-liquid funds offer limited periodic liquidity, usually through repurchase offers with caps; many are legally closed-end.

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, REIT, UCITS, AIF, ELTIF, LTAF.

Common mistakes

• Saying most hedge funds are closed-end funds. Most are open-ended private funds.
• Describing a non-traded private-credit BDC or a non-traded REIT as an open-end fund, or treating a private-credit BDC as a real estate vehicle.
• Assuming open-end funds charge no performance fees.
• Assuming redemption rights guarantee liquidity; gates, suspensions and queues can defer it.

Edge cases

• ETFs are generally open-end funds, but most investors trade their shares on an exchange; under Rule 6c-11 the fund issues and redeems shares only in creation units with authorized participants.
• An open-ended fund that suspends redemptions for a long period remains open-end in law but behaves like a closed-end fund for its investors.

Sources

1. 15 U.S.C. 80a-2 - Definitions (Investment Company Act sec. 2, incl. 2(a)(48) BDC and 2(a)(51) qualified purchaser). 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)(32), 2(a)(48) — supports: Definition of redeemable security; a BDC is a closed-end company
2. Directive (EU) 2024/927 amending Directives 2011/61/EU and 2009/65/EC (AIFMD II). 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(8) (inserting Directive 2011/61/EU Art. 16(2b)); Art. 1(27) and Annex II (new Annex V points 1-9); Art. 3(1) — supports: A manager of an open-ended AIF selects at least two liquidity management tools from Annex V points 2-8 (gate, extension of notice periods, redemption fee, swing pricing, dual pricing, anti-dilution levy, redemption in kind), not swing and dual pricing alone; one tool suffices for an AIF authorised as a money market fund; suspension and side pockets are listed separately; applies from 16 April 2026 as transposed
3. FCA Handbook COLL 15: Long-term asset funds. Financial Conduct Authority, FCA, In force from 15 November 2021; amended since. Status: In force (checked 2026-10-01). COLL 15.1.1R, 15.1.4G; COLL 15.8.12R(2)(b), (g) (rule version 30/04/2026) — supports: LTAF is an FCA-authorised fund for long-term illiquid assets; redemption determinations no more often than monthly; notice period of at least 90 days
4. Commission Delegated Regulation (EU) 2024/2759 supplementing Regulation (EU) 2015/760 (ELTIF RTS). European Commission, Official Journal of the EU, L series, 25.10.2024, Adopted 19 July 2024; entered into force the day after publication (26 October 2024). Status: In force (checked 2026-10-01). Recitals (3)-(9); articles specifying the redemption policy under Regulation (EU) 2015/760 Art. 18(6); Art. 13 (entry into force) — supports: ELTIF redemption policy and liquidity management standards; in force from 26 October 2024 (published OJ 25 October 2024)
5. Business Development Companies (BDCs) (glossary). U.S. Securities and Exchange Commission (Investor.gov), Accessed 2026-10-01. Status: current (checked 2026-10-01). Glossary entry — supports: BDCs are closed-end funds whose shares may or may not trade on an exchange
6. Global Investment Performance Standards (GIPS) for Firms 2020. 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: Time-weighted returns required unless money-weighted criteria are met
7. 15 U.S.C. 80a-5 - Subclassification of management companies (ICA s.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) — supports: Open-end company defined by redeemable securities it issues
8. 15 U.S.C. 80a-22 - Distribution, redemption and repurchase of redeemable securities (ICA s.22). 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. 22(e) — supports: No suspension of redemption or postponement of payment beyond seven days after tender, with three exceptions
9. 17 CFR 270.22e-4 - Liquidity risk management programs. U.S. Securities and Exchange Commission (CFR text via LII), Current CFR text as published by LII (accessed 2026-10-01); source line 81 FR 82264, Nov. 18, 2016, as amended at 85 FR 83295, Dec. 21, 2020. Status: in force (checked 2026-10-01). 17 CFR 270.22e-4(a)(5), (a)(8), (b)(1)(iv) — supports: 'Fund' excludes money market funds; illiquid investment definition; 15% of net assets limit on illiquid investments
10. Regulation (EU) 2023/606 amending Regulation (EU) 2015/760 (ELTIF 2.0). European Parliament and Council, Official Journal of the EU, L 80, 20.3.2023, Adopted 15 March 2023; applies from 10 January 2024. Status: In force (checked 2026-10-01). Art. 1(10) (replacing Regulation (EU) 2015/760 Art. 18(1)-(2)); Art. 2 — supports: Redemptions during the life of an ELTIF permitted only on conditions: minimum holding period, redemption policy and liquidity management tools, limit by reference to liquid assets, pro rata treatment; applies from 10 January 2024
11. Law of 17 December 2010 relating to undertakings for collective investment (UCI Law; SICAV) - CSSF consolidated text. Grand Duchy of Luxembourg; consolidation by CSSF, CSSF, Consolidated text updated 10 May 2026. Status: In force (as amended) (checked 2026-10-01). Art. 2(2) — supports: UCITS: sole object of collective investment in transferable securities and/or other liquid financial assets; units repurchased at the request of holders
12. PS23/7: Broadening retail and pensions access to the long-term asset fund. Financial Conduct Authority, FCA, June 2023. Status: Final policy (checked 2026-10-01). Para. 1.2 — supports: The LTAF is a category of authorised open-ended fund designed to invest in long-term, illiquid assets
13. Directive 2009/65/EC on the coordination of laws, regulations and administrative provisions relating to undertakings for collective investment in transferable securities (UCITS). European Parliament and Council (Official Journal L 302, 17.11.2009, p. 32; text via Publications Office), OJ L 302, 17.11.2009; as amended (including by Directive (EU) 2024/927). Status: in force (checked 2026-10-02). Art. 1(2) — supports: UCITS: sole object of collective investment in transferable securities or other liquid financial assets; units repurchased or redeemed at the request of holders
14. 17 CFR 270.6c-11 - Exchange-traded funds. U.S. Securities and Exchange Commission (CFR text via LII mirror), LII current text as fetched 2026-10-02. Status: in force (checked 2026-10-02). 17 CFR 270.6c-11(a)(1) — supports: ETF is a registered open-end management company issuing and redeeming creation units with authorized participants; shares listed and traded at market prices

• Closed-End Fund
• Evergreen Fund
• Semi-Liquid Fund
• Redemption
• Redemption Gate
• Lock-Up Period
• Hedge Fund
• Fund Structure

• Business Development Company (BDC)
• Core Infrastructure
• Core-Plus Real Estate
• Core Real Estate
• Interval Fund
• Real Estate Investment Trust (REIT)
• Time-Weighted Return (TWR)