Open-ended funds are collective investments which do not have a fixed size or number of units/shares in issue. Instead, an open-ended fund will expand or contract in line with investor demand. As investors subscribe to the fund, new units/shares are created; when investors redeem their units/shares, they are cancelled.

Open-ended funds have two important features.

• Investors have the right to redeem their units or shares on demand by selling them back to the fund manager. This means that an open-ended fund will ensure a certain level of liquidity for investors.
• The price of units or shares is determined by the net asset value (NAV) of the underlying portfolio of assets held by the fund. This value will vary in line with the portfolio’s performance and the level of investor inflow and outflow.