ETFessentials - Structural Characteristics - ETFs vs. Other Common Investment Vehicles

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STRUCTURAL CHARACTERISTICS ETFs vs. Other Common Investment Vehicles	ETFs vs. Other Common Investment Vehicles PDF
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Overview

Pricing & Trading Differences

Considering
Taxes

Hybrid Solution: Inverval Funds

A Comparison of Investment Vehicles

Downloads

The Hybrid Solution: Interval Funds

Interval funds are hybrid investments that are legally classified as closed-end funds, but which act very differently. Unlike closed-end funds—which have an IPO and then close their portfolios and subsequently trade their shares via a stock exchange—interval funds do not trade in the secondary market. Instead, they start life like an open-end mutual fund, but with a relatively closed portfolio offering only limited, not daily, redemptions. Also, like mutual funds, interval funds may continuously sell new shares to investors.

Interval funds take their name from their unique structure, which allows them to offer investors periodic repurchases of a portion of their shares at NAV at certain predetermined intervals (such as quarterly, semiannually or annually). During those specific redemption windows, an interval fund’s manager allows a specific percentage of the fund’s total shares to be tendered for sale (typically from 5% to 25%) on a pro-rated basis.

ETFs and Interval Funds: Opposites
ETFs differ from interval funds in most aspects. ETFs rely on the creation/redemption process, not direct investments from investors. ETFs trade on a stock exchange; interval funds don’t. ETFs face short bursts of trading premiums or discounts that facilitate the use of arbitrage by APs; interval funds trade at NAV at all times. ETF shares can be purchased and sold at any time throughout the day via a stock exchange; interval funds do continuously offer shares for purchase, but limit redemptions to specified intervals and, again, do not trade on an exchange.

This information is subject to change at any time and should not be construed as a recommendation of any specific security or strategy.

This information does not constitute tax advice. Please consult your tax advisor and/or state and local tax offices for more complete information.

Securities are not guaranteed by any bank, are not insured by the FDIC or any other agency, and involve investment risks, including the possible loss of the principal amount invested.

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