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Closed-Ended Investment Traded Funds – CEFs


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 represent ownership of the fund's assets. CEFs like other securities in the market, are subject to supervision by the Capital Market Authority and Saudi Exchange, 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 Exchange.

Characteristics of Closed-ended Investment Traded Funds (CEFs):

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 Exchange.

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

Assets Diversification: CEFs are characterized by the diversity of investment fields in one fund. Closed-ended traded investment is 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.

Offering and listing criteria

Criteria Main Market
Number of Unitholders At least 200 unitholders
Public Ownership At least 30%
Type of Investors All types of investors
Minimum Market Cap 300 million SAR
Leverage The fund's borrowing may not exceed 30% of its net asset value
Legal Structure Closed ended fund
Nominal Value 10 SAR per unit

What are the investment scopes and limitations of CEFs 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
  • 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.

A table for comparing CEFs, REITs, ETFs, and equity 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 Saudi Riyals A minimum of 500 million Saudi Riyals A minimum of 10 million Saudi Riyals A minimum of 300 million Saudi Riyals
The Nominal Value 10 Saudi Riyals per unit 10 Saudi Riyals per unit N\A 10 Saudi 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±