Unlike mutual funds, the closed-end funds in Harvard’s crosshairs offer a set number of shares that trade freely on the stock market.

Korea Equity Fund, for example, is listed on the New York Stock Exchange.

While mutual funds maintain a certain price for the entire day of trading, the shares of closed-end funds fluctuate in price according to supply and demand, like most publicly-traded stocks.

The underlying securities that make up a fund’s portfolio are often illiquid—or not easily convertible to cash—such as securities that trade on foreign markets.

As a result, closed-end funds often have a share price below the value of the fund’s assets per share.

When a closed-end fund is trading below the value of its underlying assets—for example, 10 percent below—it is said to be trading at a “discount.”

Wide discounts can be attractive to buyers who believe the discount will narrow. But hefty discounts can also be alarming to large shareholders like Harvard, prompting a push for liquidation.

If a fund liquidates its assets, investors obtain the actual value of a fund’s investments—minus the cost of liquidation—rather than the price quoted on the stock market.

For example, if Harvard sold all of its Korea Equity Fund shares on the New York Stock Exchange on July 31, it would have netted $18.6 million. But the net value of the fund’s assets per share was slightly higher, so liquidating the fund on that date would conceivably have generated $19.7 million before costs, based on unaudited numbers from the website of Nomura Asset Management, which manages the fund.

Harvard’s activism in closed-end funds has come as it has steadily reduced its holdings, says Cecilia L. Gondor, executive vice president at Thomas J. Herzfeld Advisors. In June 2003, Harvard maintained positions in 21 closed-end funds, Gondor says. Today, it holds fewer than five.