Closed-ended fund
A closed-ended fund raises capital during a defined commitment period, invests it over a fixed term, and returns capital through distributions and at wind-up. Investors have no right to redeem their interests before the term ends.
The structure suits assets that cannot be sold quickly or cheaply. Because investors cannot withdraw, the manager is never forced to sell an asset at a bad moment to fund a redemption, which is the failure mode that repeatedly damages open-ended funds holding illiquid assets.
The trade for investors is total illiquidity for the life of the fund. There is usually no secondary market for interests in a small fund, and any transfer requires the general partner's consent. Money committed to a six-year fund should be money the investor does not expect to need for six years.
Closed-ended funds commonly reserve extension options, allowing the manager to add a year or two to the term to sell assets in an orderly way. Read how many extensions exist and who decides, because they extend the illiquidity too.
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