Zero discount mechanism / Zero discount policy are terms used to describe a situation where an investment company commits (sometimes only in normal market conditions) to maintaining its discount close to zero by issuing shares to meet demand or buying back shares to absorb excess supply. They blur the boundary between a closed-ended fund (like an investment company) and an open-ended fund (like an OEIC or a unit trust). If they are to work efficiently, the manager must be able to raise and deploy cash in the portfolio without affecting the performance of the fund. this means they are best suited to funds that hold relatively liquid investments.