Which statement about closed-end funds is true?

• A. It always buys back investors' shares at net asset value.
• B. It is not open to new investors.
• C. It has a variable number of shares.
• D. It guarantees performance.

Answer: (B)

Closed-end funds issue a fixed number of shares at the IPO and then trade on an exchange among investors. After listing, the fund does not continuously issue new shares or redeem shares at net asset value. Any new money would only come from a secondary offering initiated by the fund, so the pool of shares outstanding stays essentially fixed. This is why the statement that it is not open to new investors is true.

The other ideas don’t fit: there isn’t a guaranteed buyback at NAV—any repurchases, if they occur, happen at market prices and are discretionary; the number of shares outstanding is fixed rather than variable; and there’s no guarantee of performance from the fund.