Glossary · Funds & Asset Management
Open-End Fund
A mutual fund that continuously issues and redeems units based on investor demand, with the number of units varying daily. Most mutual funds in Pakistan operate on an open-end basis.
01—What is Open-End Fund?
The definition — and what it means in practice.
An open-end fund is a mutual fund that continuously issues new units and redeems existing units in response to investor subscriptions and redemptions. Because units are created or cancelled as money flows in or out, the total number of units can change every day. Transactions are typically priced using the fund’s net asset value (NAV) per unit, rather than through a market order book like a listed share.
For an investor, the open-end structure affects how you enter and exit. Liquidity usually comes from the fund itself redeeming your units, not from finding another buyer on an exchange. Returns depend on how the underlying portfolio performs, minus fees and any applicable charges. This also means the fund manager may need to hold cash or sell investments to meet redemptions, which can influence performance in stressed markets.
If you invest Rs 10,000 in an open-end fund, the fund creates units for you at NAV; when you redeem, the fund cancels your units and pays you out at NAV.
- Units are issued and redeemed continuously; the unit count can change daily.
- Buying and selling is with the fund (via subscriptions/redemptions), not on an exchange order book.
- Pricing is usually based on NAV per unit rather than intraday trading prices.
- Investor liquidity depends on the fund’s redemption process and portfolio liquidity.
02—How open-end fund works on the PSX
The Pakistan-specific rules, conventions, and numbers.
Most mutual funds in Pakistan operate on an open-end basis, so PSX investors commonly encounter open-end funds as an alternative to buying individual listed shares. Conceptually, an open-end fund is closer to a pooled portfolio priced off NAV than to a PSX-listed stock where price is set by bids and offers in the market.
If you are used to PSX trading, the key difference is mechanics: shares trade through brokers and settle through the PSX clearing and custody chain (regulated by the Securities and Exchange Commission of Pakistan, clearing through NCCPL, and held at the Central Depository Company). Open-end fund units are created and cancelled by the fund on subscription and redemption, so you typically do not trade them via the PSX order book.
Open-end funds may hold PSX-listed equities, fixed income, or a mix, so the fund can still be exposed to the same underlying corporate actions and market movements you see in listed securities. What changes is how you transact: you are dealing with unit issuance/redemption based on NAV rather than exchange price formation and intraday liquidity.
03—Common misconceptions
Where investors most often get this wrong.
An open-end fund’s units trade like PSX shares throughout the day.
Open-end fund units are generally created or redeemed at a NAV-based price through the fund, not bought and sold continuously on a stock exchange order book.
Open-end means the fund’s size is fixed and cannot change.
Open-end funds can grow or shrink as investors subscribe or redeem. The number of units outstanding can vary from day to day.
You can always redeem instantly without any process or limits.
Redemptions are paid by the fund, which may need cash or to sell assets. The timing and processing depend on the fund’s dealing and redemption procedures.
04—Using open-end fund on BSL
Where this term shows up across the platform — with live data.
- Compare listed alternatives such as Exchange Traded Fund.
- Learn how NAV-based pricing works via Net Asset Value.
- Understand pooled investing basics in Mutual Fund.
- If you prefer exchange trading mechanics, explore Stocks.
05—Frequently asked questions
What investors ask about open-end fund on the PSX.
Frequently Asked Questions
An open-end fund is a mutual fund that issues new units and redeems units on an ongoing basis as investors invest or withdraw. The number of units can change daily, and transactions are typically priced using the fund’s NAV per unit.
Open-end funds create or cancel units when you subscribe or redeem, usually at NAV. Closed-end funds have a relatively fixed number of units and, if listed, can trade between investors on an exchange where price is set by supply and demand.
Open-end fund units are generally not traded like ordinary shares through the PSX order book. Instead, you transact through the fund’s subscription and redemption process, with pricing typically based on NAV per unit.
The main reference is the fund’s NAV per unit, which reflects the value of the fund’s underlying assets minus liabilities, divided by units outstanding. Fees and any applicable charges can affect your realised return.
Yes. An open-end fund may hold PSX-listed equities, fixed-income instruments, or a mix depending on its mandate. Your exposure is through the fund’s portfolio rather than direct ownership and trading of each underlying share.
06—Related terms
Keep building the picture.
A pooled investment vehicle managed by a professional fund manager. Investors buy units in the fund, which then invests in a diversified portfolio of securities. In Pakistan, mutual funds are regulated by the SECP and distributed through asset management companies.
The per-unit value of a mutual fund, calculated by dividing the total value of the fund's assets minus liabilities by the number of outstanding units.
The NAV of a mutual fund divided by the number of outstanding units. This is the base price at which units of an open-end fund are bought and sold on any given day.
An investment fund that issues a fixed number of shares at inception. Unlike open-end mutual funds, its shares are not redeemed by the fund on demand but are bought and sold on the stock exchange like ordinary shares.
A fund that tracks an index, sector, or asset class and trades on an exchange like a regular stock. The PSX lists several ETFs, including the JS Islamic Mutual Fund ETF and the Meezan Islamic ETF.
A professional or institution responsible for making investment decisions on behalf of a mutual fund or portfolio. Tasked with maximising returns within the fund's stated objectives and risk parameters.
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