A closed-end fund's fixed number of shares cannot be redeemed by investors. Shares, on the other hand, are traded on a public exchange. When a fund "closes," it means that all new shares have been sold, and no new shares or money have been added to the fund. Unlike an open-ended fund, its price is determined by the fund's supply and demand rather than its net asset value (NAV).

Investors seeking fixed-income are drawn to closed-end bond funds because many of them provide a consistent stream of income.