Investor's wiki

Capped Fund

Capped Fund

What Is a Capped Fund?

A capped fund is a pooled investment fund that has forced indicated maximum limitations remembered for its investing or expense structure. Capped funds will frequently have a set cap on fees or holdings associated with the fund's management.

Fund companies can have broad scope for adjusting expense levels and holdings caps.

What Are Capped Funds?

A few funds might decide to limit the expense ratio of the fund by specifying a capped expense level. This capped expense level gives investors a fee ceiling, which really limits the investors' costs. It is the maximum percentage a fund can charge its shareholders annually for total operating expenses.

Fund companies give subtleties on capped expense levels in their prospectus reports. Normally, capped expense levels will be established for a predetermined period of time. To restore or change a capped expense level, the fund must get endorsement from its board of directors. Fund companies might add, update, or disavow expense caps at their circumspection; in any case, documentation and disclosure must be given.

Expense cap changes will influence the annual return of a fund. Any increase in expense cap levels could lead to bring down returns, while diminishes would assist with expanding performance.

Instances of Funds with Capped Holdings

Investment companies may likewise decide to cap holdings levels of fund constituents. This should be possible at their carefulness or it could be part of an investing objective that depends on a capped index. Capped funds and indexes stick to a maximum level of investment per constituent. This can accommodate broader dispersion and keeps a single holding from excessively impacting the performance of the fund.

A number of capped funds, as well as capped indexes, exist for investors in the market. Standard and Poor's (S&P) oversees many capped indexes which can be utilized for passive investment benchmarks. Capped indexes from S&P incorporate the accompanying:

  • S&P/TSX 60 Capped
  • S&P/TSX Capped Composite
  • S&P/TSX Capped Energy
  • S&P Russia BMI Capped
  • S&P Italy Large and Mid-Cap Capped
  • S&P All Africa Capped
  • DJCI Gas and Oil Capped Component
  • S&P GSCI Cap Component

BlackRock is one investment manager giving exchange-traded funds (ETFs) managed to capped indexes. The iShares Core S&P/TSX Capped Composite Index is a passively managed index fund that looks to recreate the holdings and performance of the S&P/TSX Capped Composite Index. In 2017, the fund closely followed the benchmark's performance with a return of 9.05% versus 9.10% for the benchmark. The fund has total assets of CAD 4.256 billion. It trades on the Toronto Stock Exchange with a net asset value of CAD 25.74.


  • A capped fund may likewise allude to an upper limit put on the weight of a particular asset in its portfolio.
  • A capped fund forces an upper limit on the amount of fees it can charge investors at whatever year.
  • Capping the expense ratio on a fund can keep fees in check and draw in cost-cognizant investors.