The investment equation was far different. She thought about it for a few more minutes, made her decision, and then walked into the board meeting. Case prepared as the basis for class discussion rather than to illustrate either effective or ineffective handling of an administrative situation. Open-end funds, such as the Magellan fund, buy and sell shares at net asset value. The net asset value is determined by dividing the fund's total assets by the number of shares outstanding.
Shareholders deal directly with the mutual fund to obtain and redeem shares.
A closed-end fund is sold as a new issue to shareholders and then is traded on a stock exchange. The proceeds of the initial stock offering are used to buy stocks which are held by the fund. Many of the speciality investment funds operate as closed-end funds. The mutual fund company makes money by charging a fee for managing the investments.