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SIE: Investment Companies & Packaged Products
SIE practice questionhardClosed-end Funds - Pricing

A closed-end fund trades at a discount to its NAV. Which factor is least likely to explain this discount?

  1. AThe fund invests in illiquid or unpopular securities
  2. BThe fund has consistently strong past performance✓ Correct answer
  3. CInvestor demand for the fund is low
  4. DThe fund's management fee is considered excessive
Explanation

Why BThe fund has consistently strong past performance

Strong performance typically boosts demand, narrowing discounts. Illiquid assets, low demand, and high fees can drive discounts, making B the least likely explanation.

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