Sign up today and take advantage of member-only content — the kind of timely, cutting edge industry insight that only Money Management Executive can deliver.
  • Exclusive Online Only Content
  • Free Daily Email News Alerts
  • Asset Management Blogs

Closed-end fund price reporting made easier

The performance of 78 percent of the approximately 500 existing closed-end funds will most likely soon be published daily, providing a boost to the popularity of the product.

The Securities and Exchange Commission approved a National Association of Securities Dealers (NASD) rule last month that all closed-end funds with assets of $75 million or more may report their net asset value (NAV) daily to the Nasdaq stock market's Mutual Fund Quotation System (MFQS) for newspaper publication. MFQS historically has collected daily price information for open-end and money market funds. Nasdaq then provides that information to newspapers and others who publish it.

Because of limits in technology, Nasdaq was not able to accommodate closed-end fund reporting. Nasdaq has updated the quotation system, and now can accommodate most closed-end funds. The new rule, by setting a minimum asset size, limited the additional data to be published and made it possible for Nasdaq to accommodate the additional information. There are approximately 500 closed-end funds, according to CDA/Wiesenberger, a fund data tracking firm in Rockville, Md.

The closed-end fund industry has sought such a move in order to give its funds higher visibility. It hopes that visibility will create higher demand for closed-end funds among retail investors.

The new rule "should increase the transparency of closed-end fund prices and increase investor confidence by making valuable pricing information more readily available to investors," the SEC said in a statement approving the rule.

The rule change is welcome but the closed-end fund industry must take additional steps if it is to increase interest in its products among retail investors, said Donald M. Smith, executive director of the Closed-End Fund Association. Those steps include providing more data on closed-end fund holdings on a frequent basis, Smith said.

Officials in the closed-end fund industry hope for more retail interest in their products to increase demand, and as a result, decrease the NAV discounts which characterize many closed-end funds. Increased retail ownership also may limit the power of institutional investors who buy closed-end funds at a discount in the hope that the funds' advisers will move to make the funds open-ended.

The Investment Company Institute had backed the rule change, saying that it would serve shareholder's interests by enabling them to track performance more readily. Currently, closed-end funds distribute pricing information in a variety of ways, including by sending electronic mail and facsimiles.

The closed-end fund pricing information is reported weekly in Barron's and The Wall Street Journal, but is not available on a daily basis in most newspapers. The SEC said the new rule and reporting mechanism may reduce costs in reporting NAVs for funds.