As Closed-End Funds Lose Luster, New Exchange-Traded Products Pose Threat

Open-end mutual funds may have to watch their backs now that exchange-traded funds are on the scene. But closed-end funds aren't immune to the competition either.

If anything, the structure of the closed-end fund bears more resemblance to the exchange-traded products, or ETFs, that are being spawned by the indexing troika of Barclays, State Street and Vanguard.

Closed-end funds and their ETF cousins are similar in that they are usually traded on an exchange. Unlike traditional open-end mutual funds, they issue a finite number of shares, and the share prices fluctuate constantly, depending on demand. ...