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1.
Once a fund closes to new investors, it will not reopen.
False. Many funds have reopened, some of them more than once.
2.
Most funds, after they close to new investors, experience worsened tax efficiency.
True. When funds close, returns may slow and tax efficiency may worsen.
3.
Closings work best for which types of funds?
Funds that traffic in illiquid securities such as micro- and small-cap stocks. Closings are also good ideas for funds with a small number of managers and analysts, or those that employ rapid-trading strategies.
4.
Declining tax efficiency in a closed fund is attributable to _______.
The closing itself.
5.
If a fund is going to close, what's the best way to do it?
Announce a target asset size and close when it reaches that target. Funds that close at preset targets tend to continue to perform well after their closings.
