A closed-end fund is a type of investment company that is registered with the Securities and Exchange Commission and regulated under the Investment Company Act of 1940. Unlike mutual funds, closed-end funds generally do not issue additional shares after an initial public offering and are not required by law to redeem outstanding shares. Instead, a closed-end fund's shares are listed on a stock exchange or traded in the over-the-counter market. The market price of closed-end fund shares fluctuates like that of other publicly traded securities and is determined by supply and demand in the marketplace. The assets of a closed-end fund are professionally managed in accordance with the fund's investment objectives and policies, and the assets may be invested in stocks, bonds, and other securities.
An exchange-traded fund (ETF) is an investment company, typically a mutual fund or unit investment trust, whose shares are traded intraday on stock exchanges at market prices. Retail investors may buy or sell ETF shares through a broker just as they would the shares of any publicly traded company. Very large investors (known as authorized participants) can buy or redeem shares directly from the ETF via in-kind or sometimes cash transactions in large blocks (typically 50,000 shares).
The first ETF--a broad-based domestic equity fund tracking the S&P 500 index--was introduced in 1993.