A close-ended fund or scheme has a stipulated maturity period, typically 3-5 years. The fund is open for subscription only during a specified period at the time of its launch.
People can invest in these schemes during their new fund offers and can subsequently buy or sell units of such schemes on the stock exchanges where the units are listed. However, liquidity for such schemes in the secondary market may be very low.
In order to provide an exit route to investors, some close-ended funds give an option of selling back the units to the mutual fund through periodic repurchases at NAV-related prices.
SEBI regulations stipulate that at least one of the two exit routes is provided to investor repurchase facility, or listing on stock exchanges.