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For practical reasons we can say there are four types of investment companies, although the federal securities laws categorize investment companies only into the first three types: # Mutual funds (legally known as open-end companies); # Closed-end funds (legally known as closed-end companies); # UITs (legally known as unit investment trusts); # Exchange Traded Funds (legally known as open-end company or UIT).* *According to SEC website, Exchange-traded funds, or ETFs, are not considered to be, and are not permitted to call themselves, mutual funds, even though they are legally classified as open-end companies or UITs. This is because they differ from traditional open-end companies (mutual funds) and UITs in that ETF shares trade on a secondary market and the redeemability of ETF shares is very limited - ETFs do not sell individual shares directly to investors and their shares are only redeemable in very large blocks (blocks of 50,000 shares for example). Some types of companies that might initially appear to be investment companies may actually be excluded under the federal securities laws. For example, private investment funds with no more than 100 investors and private investment funds whose investors each have a substantial amount of investment assets (e.g. Hedge Funds) are not considered to be investment companies. This may be because of the private nature of their offerings or the financial means and sophistication of their investors.

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