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Frequently Asked Questions

What are Closed-Ended Investment Traded Funds (CEFs)?

CEFs are investment funds available to the public and its units are traded on the market during trading hours similar to Real Estate Investment Traded Funds “REITs”. It aims to facilitate investments in different sectors and fields. Also, CEFs units represents ownership of the fund's assets. CEFs like other securities in the market, are subject to supervision by the Capital Market Authority and Tadawul, each according to their duties. Capital market regulations also oblige CEFs to have high levels of transparency and disclosure by publishing periodic reports for the fund on the website of the Saudi Stock Exchange (Tadawul).

What are the basic characteristics of closed-ended funds?

An investment opportunity: providing more liquidity to investors by buying and selling fund units during trading hours

Ease of investment: CEFs are distinguished by clarity of their regulations and ease of trading their units - buying and selling - similar to shares and real estate investment traded funds listed on the Saudi Stock Exchange.

Transparency requirements: The fund manager is obligated to submit periodic reports according to the activity of each fund, and they are displayed on Tadawul website like other reports of companies listed on the Saudi Stock Exchange.

Assets Diversification: CEFs are characterized by the diversity of investment fields in one fund. Closed-ended traded investment are an asset or a group of investment assets in one fund, and they differ from Real Estate Investment Traded Funds (REITs) in the way of dividend distribution and ownership of assets and investments, as closed-ended traded funds are not allowed to invest in real estate investments.

What are the investment scopes and limitations of closed-ended funds in the Main Market?

Investment Scopes There are many asset classes available for the fund manager to invest in, for example, but not limited to:
  • Financial Securities
  • Private funds
  • Private companies
  • Money markets
  • Multi-assets
Investment Restrictions There are many asset classes available for the fund manager to invest in, for example, but not limited to:
  • CEFs may invest money and assets of the fund in private funds, provided that such investments do not exceed (25%) of the fund's net assets value. Also, CEFs feeder fund or fund of funds may not invest in private funds.
  • The Fund manager may not invest money and assets in real-estate investments
  • The fund manager may not invest more than (25%) of the fund's net assets value in a single illiquid asset.
  • The borrowing of the fund may not exceed (30%) of its net assets value.

How to invest in Closed-Ended Investment Traded Funds (CEFs)?

Just like investing in corporate stocks, there are two ways to invest in CEFs:

  • First: In the public offering stage (the primary market)
  • Second: Through the Stock Exchange (the secondary market) after the fund units are listed and traded on the Exchange.

 

Will the terms and conditions of Closed-Ended Investment Traded Funds (CEFs) be issued before offering and trading on the market?

Yes, as the fund manager abides by the conditions of the Capital Market Authority for investment funds, which include disclosure of the fund’s terms and conditions, and is committed to publish it in a sufficient period before the fund’s offering.

What are the risks involved in investing in closed-ended funds?

For more information about the risks of investing in CEFs, please review the terms and conditions of the CEF issued by the fund manager.

What are the differences between CEFs and other traditional mutual funds?

 

  • Investing in CEFs and exiting from them is easier than traditional mutual funds.
  • CEFs are characterized by high transparency compared to other traditional mutual funds.

 

A Table for comparing securities listed in the Main Market:

Characteristics Closed-ended Investment Traded Funds -CEF Real Estate Investment Traded Funds - REIT Exchange Traded Funds - ETF Equity – Main Market
The Legal Structure Closed ended fund Closed ended fund Open ended fund Public company
Minimum Market Cap A minimum of 300 million riyals A minimum of 500 million riyals A minimum of 10 million riyals A minimum of 300 million riyals
The Nominal Value 10 riyals per unit 10 riyals per unit N\A 10 riyals per share
Number of Investors At least 200 unitholders At least 200 unitholders N\A At least 200 shareholders
Profit Distribution There is no requirement to distribute profits At least 90% of the fund’s net profits must be distributed annually to the unit holders There is no requirement to distribute profits There is no requirement to distribute profits
Leverage The fund's borrowing may not exceed 30% of its net asset value The fund's borrowing may not exceed 50% of its net asset value The fund's borrowing may not exceed 10% of its net asset value N\A
Public Ownership At least 30% At least 30% N\A At least 30%
Trading Hours Trading in the market during official trading hours Trading in the market during official trading hours Trading in the market during official trading hours Trading in the market during official trading hours
Fluctuation Limits 10± 10± 10± 10±

What is the trading commission for closed-ended Investment Traded Funds (CEFs)?

The total trading commission of CEFs is the same as equities, which is 15.5 bps on each trade with no minimum commission.