12 June 2025
4 Minutes Read

What are Close-Ended Funds?

There are two common categories included in mutual funds: open-ended and close-ended mutual funds. Open-ended funds offer flexibility in buying and selling at any time, while closed-ended funds operate with a fixed structure. But remember it also offers certain advantages and limitations. Ā 

In this blog, we explain to you about what are close-ended mutual funds, how they work, their benefits, and risks with real-time examples. This guide will help you make informed decisions.  

Close-ended mutual funds are investment schemes that come with a fixed maturity period, typically 3 to 5 years. These funds are open for subscription only during the NFO (New Fund Offering) period. After completing the NFO period, no new investors can join, or existing ones can exit until maturity. To offer some liquidity, these funds are listed on stock exchanges that will help investors to buy or sell units like stocks. Ā 

Like open-ended funds, close-ended funds also have various types that are based on asset allocation:Ā 

Types Definition 
Equity close-ended funds These are aim for long-term capital appreciation and ideal for investors with high-risk appetite.  
Debit close-ended funds It’s safer and suitable for conservative investors and they can invest in bonds and debentures.  
Hybrid close-ended funds Combination of equity and debt instruments, offering balanced risk-return profile. 
Fixed Maturity Plans (FMPs) Most popular close-end debt fund, it has a fixed tenure and invest in instruments 

Close-ended funds offering you many benefits some of them are listed below;Ā 

Benefits Definition 
Stability Fund managers can plan long-term strategies by using this strategy, and they don’t need to worry about sudden withdrawals. 
Disciplined Investing It can prevent impulsive decisions, because the investment is locked in for long and fixed terms so they can think long-term.  
Better Returns Because of the stability of funds, fund managers can deploy strategies to get better returns.  
Market Price Based on Demand Selling on the stock exchange at prices that are determined by the demand and units of the scheme. 

Before we decide, it’s better to know the drawbacks of close-ended mutual funds that are given below;Ā 

Drawbacks Definition 
Limited Liquidity Investors can’t redeem their units before the end of the maturity period. 
Only Lump Sum OptionĀ It offers only Lump sum option, unlike open-ended funds, close-ended funds didn’t offer SIP.Ā 
Driven by Fund Manager In open-ended schemes, investors can analyze the performance of a mutual fund scheme in different market situations. This data is available with the scheme, but in closed-ended funds this is not available.   
Market-driven Prices If liquidity is low on the stock exchange, you must face challenges while selling units.  
Close-ended

*Source: AMFI

  Latest NAV 5-Year Return (%)  
Scheme Name Benchmark Regular Direct Regular  Direct Benchmark 
Aditya Birla Sun Life Frontline Equity Fund Nifty 100 TRI 527.5000 582.4800 22.23 23.05 21.49 
Axis Large Cap Fund BSE 100 TRI 60.3600 69.3700 16.45 17.67 22.46 
Bandhan Large Cap Fund BSE 100 TRI 76.4780 87.7310 20.80 22.25 22.46 
Baroda BNP Paribas Large Cap Fund Nifty 100 TRI 221.1996 254.8164 20.90 22.36 21.49 
Canara Robeco Bluechip Equity Fund BSE 100 TRI 63.2000 72.9200 20.69 22.34 22.46 
DSP Large Cap Fund BSE 100 TRI 477.2320 521.0330 21.47 22.43 22.46 
Edelweiss Large Cap Fund Nifty 100 TRI 84.3500 96.6900 21.18 23.07 21.49 
Franklin India Bluechip Fund Nifty 100 TRI 1020.3326 1128.6118 20.06 21.00 21.49 
Groww Large Cap Fund Nifty 100 TRI 42.5900 51.0100 18.52 20.18 21.49 
HDFC Large Cap Fund Nifty 100 TRI 1136.7040 1228.5730 23.16 23.88 21.49 

Some of the closed-end mutual funds offered in India is given below;Ā 

šŸ – ICICI prudential growth fund – series 2Ā 

šŸ – Sundaram Long Term Tax Advantage Fund Series IIIĀ 

šŸ – SBI Long Term Advantage Fund Series IIIĀ 

šŸ – Reliance FHF XXV Series 15Ā 

šŸ – Axis Fixed Term Plan – Series 96Ā 

These funds offer a fixed maturity period, and the funds are open for subscription only in their NFO periods. Ā 

If you are searching for a disciplined and long-term fund, close-ended mutual funds are ideal for all investors. We have already seen that there are so many benefits like stability and better returns, but they come with some drawbacks like limited liquidity and lump sum option. So, you can choose the fund according to your financial goals and risk appetite. Ā 

Do you want to invest in mutual funds by solving your doubts? Navia Markets is here for you to assist in your investment journey. Ā 

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What are close-ended mutual funds?Ā 

Close-ended mutual funds are investment schemes with a fixed maturity period and are open for subscription only during their NFO period.Ā 

How are close-ended funds different from open-ended funds?Ā 

Open-ended funds allow investors to buy or redeem units at any time, while closed-ended funds restrict entry and exit to specific timeframes.Ā 

Can I redeem my close-ended fund before maturity?Ā 

Not directly with the AMC. However, you can sell your units on a stock exchange where the fund is listed.Ā 

Do close-ended mutual funds offer SIPs?Ā 

No, they do not allow SIP investments.

Is it safe to invest in closed-ended funds?Ā 

They are subject to market risks like any mutual fund. However, fixed maturity and defined investment periods offer some predictability.Ā 

Do closed-end funds pay dividends?Ā 

Yes, some close-ended funds offer dividend options based on the performance of the underlying assets.Ā 

Can close-ended funds outperform open-ended funds?Ā 

In certain market conditions and with effective fund management, yes. However, it is not guaranteed.Ā 

DISCLAIMER: Investments in the securities market are subject to market risks, read all the related documents carefully before investing. The securities quoted are exemplary and are not recommendatory. Brokerage will not exceed the SEBI prescribed limit.