Do closed-end funds give superior returns compared to open-end funds?

Do closed-end funds give superior returns as they don't face the threat of sudden redemptions?
-Raju Gopal

There are advantages and disadvantages to both open-end and closed-end funds. The biggest disadvantage to a closed-end fund is that investors cannot invest regularly. The advantage you are referring to is also a disadvantage because investors are forced to invest the money. Of course, the fund manager has the advantage of taking a long-term view and he is not subject to investors' day to day actions, but there is no such evidence in support of superior returns. When I compare the performance from the start of a closed-end fund with a similar open-end fund, I have not been able to find any evidence that closed-end funds do better. Closed-end funds benefit from the timing perspective, that is, when the fund was launched and how the market was at the time of the launch.

This article was originally published on February 11, 2019.