Closed Retail Fund With Questions

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The mutual fund is an investment fund that is generally available to all and in which institutional investors can still participate. The fund collects investors’ money in order to then invest this capital in one or more investment areas in accordance with a previously defined investment strategy.


The mutual fund is closed if the investor cannot return his units before the start of the liquidation or expiry phase. However, if the investor is guaranteed a right of return in the contract so that he can return the fund units before the start of the liquidation or expiry phase, or if ordinary termination rights have been agreed in favor of the investor, this is an open mutual fund.  Closed-end funds usually have a longer minimum term. This is because the assets in which a closed-end mutual fund invests are typically real estate, ships, aircraft or company holdings that cannot be quickly sold again, i.e. illiquid assets.

Possible goals: When could a closed mutual fund make sense for me?   

A closed mutual fund only makes sense for those investors who want to invest long-term and can do without their capital during this time. However, if you want to fall back on the invested money in the short term, for example for a purchase, you should not invest in closed-end mutual funds.

Risks: What are the dangers of investing in a closed-end mutual fund? 

Risk of loss: You have no guarantee of how the fund will actually perform. Whether the investment pays off for you or you have to take losses ultimately depends on whether the closed-end mutual fund has invested in the “right” assets and markets and has therefore made the right investment decisions in retrospect. If, on the other hand, the closed-end mutual fund has invested the available capital in the “wrong” markets, there is a risk that you can lose your money not only partially, but in the worst case even completely. In addition, the assets in which a closed-end mutual fund invests are mostly highly illiquid, meaning that they are extremely difficult to sell. This means that if the fund goes into financial difficulties, it will be difficult

Right of return: Since you as an investor do not have a right of return before the end of the term of the mutual fund and the units in a closed mutual fund are usually not traded on the stock exchange, such units are difficult to resell before the termination of the duration of the Investment.

Use: What can I get from investing in a closed mutual fund?       

Fund shares are characterized by a long so-called holding phase. As an investor, you benefit from the developments in the assets held by the fund. In the case of closed-end mutual funds that invest in real assets, for example in real estate, the investors also benefit from current income, such as rental income from buildings.

 In most cases, a closed mutual fund invests its capital only in a few assets. Nevertheless, it must be risk diversified. When investing the money entrusted to the fund, you should not just “bet on a horse” with which the whole success stands or falls. The closed-end mutual fund must either invest in at least three assets that are approximately equivalent. Or it must be guaranteed that the risk of default is spread. This can be ensured, for example, by a versatile use structure of the asset. Such a versatile use structure is given, for example, when the closed public fund is invested in a shopping center in which various types of business are represented, for example retail, restaurants or pharmacies. As a result, the structure of the tenants is scattered and with it the risk of not receiving any rent. for example retail, restaurants or pharmacies. As a result, the structure of the tenants is scattered and with it the risk of not receiving rent. for example retail, restaurants or pharmacies. As a result, the structure of the tenants is scattered and with it the risk of not receiving any rent.

What are my obligations and costs when buying a closed-end mutual fund?

Costs: When you buy units in a closed-end mutual fund, you pay the issue price the amount of your participation plus a so-called front-end load. This front-end load directly benefits the manager of the fund. In addition, you as an investor have to be prepared for other costs: For example, the initial costs are incurred once during the joining phase for the selected fund. These serve to cover the one-off expenses and remuneration associated with the creation of a fund, such as conception, establishment, marketing or sales. However, there are not only one-off costs that you will have to incur in purchasing fund units, there are also a number of ongoing costs.

Fees: There may also be fees to third parties for activities such as facility management in the case of a real estate fund. Finally, there is the fee for the depositary who holds the fund’s assets and a performance-related fee for the fund manager, which is usually also due. However, the investor does not pay neither the initial costs nor the running costs directly. Instead, these costs reduce the value of his participation in the fund. As a result, the higher the costs, the lower the profit margin for an investor.

Termination: Can I return or sell the fund unit at any time?         

During the entire term of the closed retail fund , the investor has no right of return for his fund units. In order to return the shares after all, he only has the right to extraordinary termination and the statutory rights of withdrawal . In principle, it is possible to sell your fund units to other investors or third parties via the secondary market, but this is usually associated with high discounts due to the low trading volume.

What information does the provider provide me?

Each supplier of a closed retail fund is obligated to prepare a sales prospectus. This provides both the economic and legal information of the related fund. In addition, key investor material that summarizes the information in the offering prospectus must be prepared. The provider must keep the sales prospectus and key investor information up to date during the entire sales phase.

The sales prospectus, main investor documents and the most recently released annual and semi-annual reports must be made available to all investors prior to the acquisition of units in the fund. If you seek advice from a financial services institution before investing in a closed-end mutual fund,

The key investor information document is intended to enable you to understand the type and risks of the relevant fund so that you can make an informed decision on the basis of this information. Do not take this lightly! Make sure to read the primary investor facts carefully before you vote to buy a share of the investment. To be able to properly compare the different funds, the primary investor details must be in a standard format. In addition, it is required by law that the key investor information contains information on the following aspects: the fund itself, its management company, the investment objectives and investment policy, the risk and return profile, as well as the costs and fees and the previous performance. The provider may also have to show you performance scenarios.

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