Open Ended vs Closed Ended Funds / What’s the Difference?

Open ended vs closed ended funds / What’s the difference?

What’s up, everyone? Today, I’m going to explain the difference between these 2 types of funds!

Click here to see my YouTube video!

In the Investment Fund Secrets courses and videos, we refer to this a lot, so, today I’m going to explain it.

Closed Ended

Many VC, PE, and RE funds are closed-ended.

Let’s say a VC fund is 7 to 10 years long (how long the money is locked up).

In a closed ended fund, the money is gathered at a certain beginning point.

Then, it’s all locked up until about year 5, 6, or 7. That is when the investors get their returns and make a ton of money!

So, an investor can’t pull their money out because it would hurt the entire fund.

Let’s take a look at open-ended funds…


Here, investors can put in and pull out whenever they want.

This way, there is no official ‘start’ to the fund.

If the fund can stay in business, it could last up to 25, 30, or 50+ years.

The nice thing about running a fund is that you get to write the rules. Like I said in my video…

“I currently have an open-ended fund. I give investors a lock-up period of 1 year, just so they can get some returns before cashing out.”

Just to make sure the returns are equal in proportion for everyone, make sure to calculate your net asset value.



  • Not a lot of liquidity
  • Lock-up period is anywhere from 3 to 10 years
  • Payout period doesn’t come until year 6 or 7


  • More liquidity
  • Lock-up period can be yearly or whenever
  • Payout period could be monthly, quarterly, or yearly

When framing your fund, this step is crucial! You need to make some decisions…

  • close-ended or open-ended fund?
  • What kind of timeline?
  • How long are the lock-up terms?

That’s it for today, good luck with your funds!

See you soon

Bridger Pennington

Want to get direct guidance for your fund? Schedule a time with my Fund Advisors!

DISCLAIMER: This content is for educational and informational purposes only. It is not to be taken as tax, financial, or legal advice. You should always consult a legal professional before taking action. Furthermore, this is not a recommendation to buy or sell any security. The content is solely just the opinion of the authors.

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