Which type of fund has the ability to buy back outstanding shares periodically?

The correct answer concerning the ability to buy back outstanding shares periodically is closed-end discretionary funds. These funds operate within a fixed number of shares that are initially issued to investors when the fund is created. Unlike open-end mutual funds, which continuously issue and redeem shares at the net asset value (NAV), closed-end funds are traded on stock exchanges and may have their shares bought back by the fund itself under specific circumstances, typically through a tender offer or a buyback program.

This ability to repurchase shares can provide liquidity for investors and may enhance the value of the remaining shares. Closed-end funds can also be subject to market premiums and discounts based on investor sentiment and market conditions, which is a feature that distinguishes them from other types of funds.

Other types of funds mentioned do not have this specific capability. Open-end mutual funds continuously issue and redeem shares based on demand, which does not constitute buying back outstanding shares but rather adjusting the number of shares based on investor purchases and redemptions. Exchange-Traded Funds (ETFs) also work on a similar principle to open-end funds, as they issue and redeem shares on the market without the fund directly buying them back periodically. Money market funds primarily invest in short-term debt securities and offer liquidity by redeeming shares